AN ANALYST GATHERED THE FOLLOWING INFORMATION ABOUT A COMPANY
61. An analyst gathered the following information about a company: Current earnings per share $6.00
Current dividend per share $2.40
Current market price per share $35
Required rate of return on the stock 15.0%
Expected growth rate of earnings and dividends 8.0%
Which of the following statements best describes the company’s price-to-earnings ratio
(P/E)? Compared with the company’s trailing P/E, the P/E based on the Gordon growth
dividend discount model is:
A. the same.
B. higher.
C. lower.