Toys Galore Has Historically Had a P/E Ratio of 18

question 88

Multiple Choice

Toys Galore has historically had a P/E ratio of 18.5. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $2.10. These earnings are expected to increase by 5.0 percent next year. What is the expected price of this stock one year from now?

• A)$39.31
• B)$40.79
• C)$41.30
• D)$42.78
• E)$43.79

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Definitions:

Efficiency

The ability to achieve a desired result or output with the least waste of time, effort, or resources.

Equity

Fairness.

Zero-Profit Equilibrium

A situation in a competitive market where each firm earns exactly what it spends, leaving no net profit.

Average Cost

The aggregate expense of manufacturing, when divided by the total goods manufactured, denotes the unit cost.