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21 June, 16:17

Same company as in RA 5.3: Stock price of $42, earnings of $2.12 per share during the last twelve months, forecasted earnings of $2.84 over the following year, and average earnings growth forecast of 12.5% per year for the next five years. What is this stock's Forward P/E ratio, rounded to one decimal place

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  1. 21 June, 17:26
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    P/E ratio = $14.78

    Explanation:

    Market value per share = $42

    earning per share = $ 2.84

    As we know that:

    Price earning ratio = market value per share / earning per share

    = $42 / 2.84

    = $14.78

    Price earning ratio is an indicator to investor whether to invest in this company long term or not.
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