Question

The current price of Parador Industries stock is $66 per share. Current sales per share are $22.10, the sales growth rate is 4.5 percent, and Parador does not pay a dividend. The expected return on Parador stock is 17 percent.

a. Calculate the sales per share one-year ahead. (Round your answer to 2 decimal places.)

b. Calculate the P/S ratio one-year ahead. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

a. Sales per share one-year ahead = Current sales per share * (1 + g)

g = 4.5%

Sales per share one-year ahead = 22.10 * (1 + 0.045)

Sales per share one-year ahead = $23.0945

Sales per share one-year ahead = $23.09

b. P/S = Price per share one-year ahead/Sales per share one-year ahead

Price per share one-year ahead = Current price * (1 + r)

r = 17%

Price per share one-year ahead = 66 * (1 + 0.17)

Price per share one-year ahead = $77.22

P/S = Price per share one-year ahead/Sales per share one-year ahead

P/S = 77.22/23.0945

P/S = 3.3436532508

P/S = 3.34