Question

New York Times Co. (NYT) recently earned a profit of $1.21 per share and has a P/E ratio of 19.59. The dividend has been growing at a 7.25 percent rate over the past six years. If this growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged

Answer 1

Answer:

If the growth rate continues, the stock in 5years if the P/E ratio remains unchanged will be $33.64.

Explanation:

Given

Profit/share (Eo) = $1.21

Percentage growth (g) =7.25%

Number of years = 5 years

To find stock price, we use the formula:

$P_n = [P/E] * E_0 * [1 + g]^n$;

So, we have

$P_5 = 19.59 * 1.21 * [1 + 0.0725]^5$

= $33.64

Therefore, If the growth rate continues, the stock in 5years if the P/E ratio remains unchanged will be $33.64.