Question
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
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. | Underpriced, because it has a PEG ratio of 1 | |
| B. | Overpriced, because it has PEG ratio of 1 | |
| C. | Overpriced, because it has PEG ratio of 2 | |
| D. | Underpriced, because it has a PEG ratio of 2 |
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Finance For Development
Authors: Barbara Stallings
1st Edition
0815780850, 978-0815780854
