P/E Ratio Calculation and Stock Price | CFA Level 1 Exam Preparation

P/E Ratio Calculation and Stock Price

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Question

The P/E ratio of a stock is 12.3. Its current earnings are $12.1 per share and a growth rate of 3.9%. The current price of the stock is:

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Explanations

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A. B. C. D.

D

It is important to remember that the P/E ratio is the ratio of the current stock price and next year's expected earnings. Therefore, current stock price = 12.3 * 12.1 *

1.039 = $154.6

To calculate the current

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