Flex Co. just paid total dividends of $850,000 and reported additions to retained earnings of $2,550,000....
Flex Co. just paid total dividends of $850,000 and reported additions to retained earnings of $2,550,000. The company has 625,000 shares of stock outstanding and a benchmark PE of 16.4 times. What stock price would you consider appropriate?
Homework Answers
The stock price is computed as shown below:
= PE ratio x earnings per share
Earnings per share is computed as follows:
= (Addition to retained earnings + dividend paid) / Number of shares outstanding
= ($ 2,550,000 + $ 850,000) / 625,000
= $ 5.44
So, the stock price is computed as follows:
= $ 5.44 x 16.4
= $ 89.216
Feel free to ask in case of any query relating to this question
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