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Scientex Inc., a maker of electronic equipment, is a young company that has been growing rapidly. Its common stock pays no dividend. The company just
Scientex Inc., a maker of electronic equipment, is a young company that has been growing rapidly. Its common stock pays no dividend. The company just reported earnings per share of RM2.45 for last year. Analysts expect earnings per share for the coming year to grow at 40%. Sofea Jane is considering the purchase of this stock, which is currently priced at RM75 per share. her research indicates that the average price/earnings ratio for companies in this industry is 21. 1) On the basis of the just-reported earnings, calculate the value of stock. 2) On the basis of an anticipated 40% growth in earning per share, what is the company expected earnings per share for next year? What is the new value of this stock? 3) Should Sofea Jane buy this stock? Why
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