LeBlanc Inc

question 50

Multiple Choice

LeBlanc Inc. currently has earnings of $10 per share, and investors expect that the earnings per share will grow by 3 percent per year. Furthermore, the mean PE ratio of all other firms in thesame industry as LeBlanc Inc. is 15. LeBlanc is expected to pay a dividend of $3 per share over the next four years, and an investor in LeBlanc requires a return of 12 percent. What is the forecasted stock price of LeBlanc in four years, using the adjusted dividend discount model?

• A) $150.00
• B) $163.91
• C) $45.00
• D) $168.83
• E) none of the above

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Definitions:

Law of Demand

A principle stating that, ceteris paribus, there is an inverse relationship between the price of a good or service and the quantity of it that consumers are willing to purchase.

Quantity Purchased

The total number of units bought of a particular good or service.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, in contrast to a normal good.

Equilibrium Price

The cost at which the amount of a product or service consumers want to buy matches the amount that manufacturers are willing to sell.