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A compay is expected to have earnings of $1.26 per share in one year, $1.75 per...

A compay is expected to have earnings of $1.26 per share in one year, $1.75 per share in two years, $2.51 per share in three years, and $2.96 in four years. The dividend payout ratio is also expected to remain at 40% over the next four years. The lagging P/E ratio is expected to increase up to 25 in three years. If the required rate of return is 10%, what is a fair value for this stock today?

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Answer #1

Fair value for this stock today=(1.26/1.1+1.75/1.1^2+2.51/1.1^3)*0.4+25*2.51/1.1^3=48.93601803

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