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Price-to-Earnings (P/E) Ratio

P/E Ratios

Castor Corp. and Pollux Corp. each have 100 million shares and earnings per share of $2. Castor has a P/E ratio of 20, while Pollux has a P/E ratio of 15. Castor makes an offer to acquire Pollux, offering .80 shares of Castor for each share of Pollux; the offer is accepted by Pollux shareholders. Suppose that the combined firm (

Stock Price

46. The company has been hit hard due to increased competition. The co.'s analysts predict that earnings (and dividends) will decline at a rate of 5% annually forever. Assume that ks = 11% and Do = $2. What will be the price of the co's stock 3 year from now? 27.17 6.23 28.50 11.88 20.63