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Flex Co. just paid total dividends of $975,000 and reported additions to retained earnings of $2,925,000. The company has 675,000 shares of stock outstanding and a benchmark PE of 16.9 times. What stock price would you consider appropriate?

Respuesta :

funmilaciousfunmie78

Answer:

Stock price = $97.64

Explanation:

Earnings per share = (Dividend + addition to retained earnings) / Total number of shares

Earnings per share (EPS)= $(975000 + $2,925,000) / 675,000

                                         = $(3900000/675000)

                                         = $5.777777778

EPS = $5.777777778

PE ratio = Stock price / EPS

16.9= Stock price /  $5.777777778

Stock price = 15.4 x  $5.777777778

Stock price = $97.64

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