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Regal, Incorporated, currently has an EPS of $1.30 and an earnings growth rate of 6.5 percent. If the benchmark PE ratio is 30, what is the target share price five years from now

Respuesta :

abiolataiwo2015

Based on the information given the target share price five years from now is $53.4.

First step is to earning per share for year 5 using this formula

Earning per share for year 5=EPS×(1+Growth Rate)^5

Let plug in the formula

Earning per share for year 5=$1.30×(1+.065)^5

Earning per share for year 5=$1.30×(1.065)^5

Earning per share for year 5=$1.78111266

Second step is to calculate the  target share price

Target Stock price=$1.78111266×30

Target Stock price=$53.4

Inconclusion  the target share price five years from now is $53.4.

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