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I need to know if this problem is correct. I've attached the problem and the Table that it references. 7-15 Refer to Table 7-5. Assume
I need to know if this problem is correct. I've attached the problem and the Table that it references.
7-15 Refer to Table 7-5. Assume that because of unusually bright long-term prospects, analysts determine that Johnson & Johnson's P/E ratio in 2011 should be 10 percent above the average high J&J P/E ratio for the last 10 years. (Carry your calculation of the P/E ratio two places to the right of the decimal point in this problem.) What would the stock price be based on projected earnings per share of $5.35 (for 2011)? J & J Average high P/E for last 10 years 20.27 10% above S&P x 1.10 J & J's P/E Ratio 22.297 Stock Price = Projected EPS $5.35 x Estimated P/E Ratio of Stock Price = $5.35 x 22.297 = $119.288 Stock Price Rounded = $5.35 x $22.30 = $119.30
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