Using the ?P/E ratio approach to? valuation, calculate the value of a share of stock under the following? conditions:
the? investor's required rate of return is 16 percent,
the expected level of earnings at the end of this year (E1?) is $5
the firm follows a policy of retaining 20 percent of its? earnings,
the return on equity ?(ROE?) is 13 percent,
similar shares of stock sell at multiples of 5.970 times earnings per share.
Now show that you get the same answer using the discounted dividend model.
The stock price using the ?P/E ratio valuation method is?
? (Round to the nearest? cent.)