Homework Answers
Current PE ratio = (Price per share/ Current EPS) = 15/2.5 = 6
Leading PE ratio = Price per share/ Next years EPS
Next year EPS = Current year EPS * 1.05 ( since EPS is also expected to grow (5%) with dividends to justify the dividend payout and retention ratio)
Next year EPS = 2.5* 1.05 = 2.625
Leading PE ratio = 15/2.625 = 5.714
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