A firm has a stock price of 6000 per share The firms earning

A firm has a stock price of $60.00 per share. The firm\'s earnings are $80 million, and the firm has 25 million shares outstanding. The firm has an ROE of 16% and a plowback of 70%, what is the firm\'s PEG ratio? 1.54 O 1.67 O 1.7 O 1.30

Solution

Earnings per share=Earnings/Number of shares outstanding

=(80/25)=$3.2

Growth rate=ROE*Plowback ratio

(0.16*0.7)=11.2%

PE ratio=Current price/EPS

=(60/3.2)=18.75

PEG ratio=(Current price/EPS)/Growth rate

=(18.75/11.2)

=1.67(Approx).