Problem:
Kellog Co. recently earned a profit of 2.72 earnings per share and has a P/E ratio of 19.60. The dividend has been growing at a 5 percent rate over the past few years.
Required:
Question: If this growth rate continues, what would be the stock price in four years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 12 in four years?