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Gnomes R Us just paid a dividend of $1.90 per share. The company has a dividend payout ratio of 25 percent. If the PE ratio is 16.9 times, what is the stock price

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abiolataiwo2015

Answer:

Stock price=$128.44

Explanation:

Calculation for stock price

First step is to calculate for dividend payout ratio using this formula

Dividend payout ratio=Dividend payout/Earnings

Let plug in the formula

Earnings=($1.90/0.25)

Earnings=$7.6

Now let calculate for PE ratio using this formula

PE ratio=Stock price/EPS

Let plug in the formula

Stock price=$7.6*16.9times

Stock price=$128.44

Therefore Stock price will be $128.44

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