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  1. business
  2. accounting
  3. suppose that a firm's recent earnings per share an

Suppose that a firm's recent earnings per share and dividend per share are $3.45 and...

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Accounting

Suppose that a firm's recent earnings per share and dividend per share are $3.45 and $3.20, respectively. Both are expected to grow
at 6 percent. However, the firm's current P/E ratio of 33 seems high for this growth rate. The P/E ratio is expected to fall to 29 within
five years.
Compute the dividends over the next five years.
Compute the value of this stock price in five years.
Calculate the present value of these cash flows using an 8 percent discount rate.
Complete this question by entering your answers in the tabs below.
Dividends
Stock price Present value
Compute the dividends over the next five years.
Note: Do not round intermediate calculations. Round your answers to 3 decimal places.
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