Problem $8-19$ P$/$E Model and Cash Flow Valuation $($LG$8-5,$ LG$8-7)$

Suppose that a firm's recent earnings per share and dividend per share are $$3\mathrm{.}40$ and $$2\mathrm{.}40,$ respectively. Both are expected to grow at $10$ percent. However, the firm's current P$/$E ratio of $15$ seems high for this growth rate. The P$/$E ratio is expected to fall to $11$ within five years.

Compute the dividends over the next five years.

Compute the value of this stock in five years.

Calculate the present value of these cash flows using a $12$ percent discount rate.

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Stock price

Present value

Calculate the present value of these cash flows using a $12$ percent discount rate.

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

$\backslash$table$[[$Present value,$$,182\mathrm{.}26$