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Flex Co. just paid total dividends of $525,000 and reported additions to retained earnings of $1,575,000. The company has 495,000 shares of stock outstanding and a benchmark PE of 15.1 times. What stock price would you consider appropriate?

a.$52.80
b.$17.60
c.$70.40
d.$63.36
e.$66.88

Respuesta :

Answer:

Correct answer is 20.80$.

Options given are incorrect.

Explanation:

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

Earnings per share = (525000 + 1570000) / 495000

EPS = 1.37777

PE ratio = Stock price / EPS

15.1 = Stock price / 1.377777

Stock price = 15.1 x 1.37777

Stock price = 20.80$

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