If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company: Year 1 Year 2 Year 3 Year 4 High price $90.25 $105.71 $127.73 $139.12 Low price 71.37 86.63 75.75 114.50 EPS 6.62 9.04 8.70 10.29 Earnings are expected to grow at 8 percent for the next year.
Required:
1. What is the high target stock price in one year?
2. What is the low target stock price in one year?