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The Blooming Flower Co. has earnings of $3.68 per share. a. If the benchmark PE for the company is 18, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the benchmark PE for the company is 21, how much will you pay for the stock?

Respuesta :

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Answer:

a) $66.24

b) $77.28

Explanation:

The price to earnings ratio (PE ratio) is a valuation used by investors to determine if a stock is overvalued or undervalued.

Payment for stock is the product of Benchmark PR ratio and earnings per share.

Given that the earnings per share is $3.68 per share

a)  If the benchmark PE for the company is 18

Payment for stock = Benchmark PR ratio Ă— earnings per share = 18 Ă— $3.68 per share = $66.24

a)  If the benchmark PE for the company is 21

Payment for stock = Benchmark PR ratio Ă— earnings per share = 21 Ă— $3.68 per share = $77.28

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