Question

he Rose Flower Company has earnings of $5.27 per share. The benchmark PE for the company is 18.

What stock price would you consider appropriate?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

What if the benchmark PE were 21?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Answer 1

To calculate the appropriate stock price based on the earnings per share (EPS) and the price-to-earnings (PE) ratio, you can use the formula:

\[
\text{Stock Price} = \text{EPS} \times \text{PE Ratio}
\]

### Calculation with Benchmark PE of 18:

Given:
- EPS = $5.27
- Benchmark PE = 18

\[
\text{Stock Price} = 5.27 \times 18 = 94.86
\]

### Calculation with Benchmark PE of 21:

Given:
- EPS = $5.27
- Benchmark PE = 21

\[
\text{Stock Price} = 5.27 \times 21 = 110.67
\]

### Summary of Results:
- Appropriate Stock Price with PE of 18: **$94.86**
- Appropriate Stock Price with PE of 21: **$110.67**