New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P
ID: 2785965 • Letter: N
Question
New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P/E ratio of 19.40. The dividend has been growing at a 9.25 percent rate over the past six years.
If this growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 26 in five years? (Round your answers to 2 decimal places.)
New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P/E ratio of 19.40. The dividend has been growing at a 9.25 percent rate over the past six years.
Explanation / Answer
Stock price = P/E * earnings
stock price = 19.40*1.61
stock price = 31.23
earnings in 5 years = 1.61*1.09255 = 2.51
price with new P/E = 26 * 2.51
price with new P/E = 65.15