Question
1. A firm has a stock price of $50 per share. The firms past 12 month earnings per share is $2.5 and the firm's future
1. A firm has a stock price of $50 per share. The firms past 12 month earnings per share is $2.5 and the firm's future earning is $5 per share. The firm has an ROE of 20% and a dividend payout ratio of 50%. Given an industry average PEG ratio of 1.6, is the firms stock more likely to be overpriced or underpriced?
A. Overpriced, because it has PEG ratio of 1
B. Overpriced, because it has PEG ratio of 2
C. Underpriced, because it has a PEG ratio of 1
D. Underpriced, because it has a PEG ratio of 2
2. Rutland Corp's stock price is $30.25 and its earnings per share for the past year were $2.45. The forecasted earnings per share for the future 12 month are $2.32. What is its trailing (not forward) P/E ratio?
A. 13.04
B. 12.70
C. 12.35
D. 11.65
E. 12.00
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