Stock value using PE ratio to estimate selling price An investor is going to buy stock, collect dividend payments for five years, then sell the stock. The investor demands a certain percent return on investment. Based on the following details, what is the maximum price the investor should be willing to pay for this stock? Scenario A common stock: . Dividend expected at end of first year = $1.00 Expected growth rate of dividends = 12% until end of year 5 = EPS $3.00 at end of year 5 PE (Price to Earnings) ratio expected at end of year 5 = 5.0 times Required rate of return = 10% Selling price = at end of year 5