Question

Flex Co. just paid total dividends of $800,000 and reported additions to retained earnings of $2,400,000. The company has 605,000 shares of stock outstanding and a benchmark PE of 16.2 times. What stock price would you consider appropriate?

Answer 1

Given	Dividend paid=	$800,000
	Additional Retained Earnings=	$2,400,000
	P/E Ratio	16.2
	Total shares outstanding	605000
Solution
	Dividend paid=	$800,000
Add:	Additional Retained Earnings=	$2,400,000
	Total Earnings/Net Income=	$3,200,000
	P/E Ratio=	Market Price/Earning
	16.2=	Market Price/3200000
	So, Total Market Price =	3200000*16.2
		= $ 51,840,000
	Price per stock=	Total Market Price/total number of shares outstanding
	=	51840000/605000
	=	$                    85.69