Ramsay Corp. currently has an EPS of $2.35, and the bench-mark PE for the company is 21.

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Ramsay Corp. currently has an EPS of $2.35, and the bench-mark PE for the company is 21. Earnings are expected to grow at 7 percent per year.

a. What is your estimate of the current stock price?

b. What is the target stock price in one year?

c. Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year? What does this tell you about the implicit stock return using PE valuation?

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Corporate Finance

ISBN: 978-0077861759

10th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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Question Posted: Aug 28, 2014 10:10 AM

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Ramsay Corp. currently has an EPS of $2.35, and the bench-mark PE for the company is 21.

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a Using the equation to calculate the price of a share of stock with the PE ratio P ...View the full answer

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