# price to sales (toughy)

need help : ( pepp Wrote: ------------------------------------------------------- > good job, another easy one, from another topic > > The Larson Corp. had revenue per share of \$400 in > 2002, earnings per share of > 5.00, and paid out 50% of its earnings as \> dividends. If the return on equity \> (ROE) and required rate of return of Larson are \> 15% and 11 %, respectively, \> what is the appropriate P/S multiple for Larson? \> A. 0.12. \> B. 0.18. \> C. 0.19. \> D. 0.90. stuck here. i know you need to find find stock price and divide by 400 stock price use DDM and got 2.68/K- G) = 2.68/7.5% = 35 bucks or so 35/400 == .08??/ NEED HELP HERE

No its c) 0.19 your calc. is wrong cause g is 7.5% and r is 11%

g = 0.5*0.15 = 0.075 next dividend = 2.5*(1.075) = 2.6875 2.6875/(0.11-0.075) = \$76.78 P/S = 76.78/400 = 0.19

I got something a little different… using ddm— 2.68/ (k-g)=2.68/3.5%=\$76.78 stock price/400=.19 daj224 it looks like you forgot the 11%required rate of return

daj, dont post new posts for question that are already being discussed, have lil patience.

pepp Wrote: ------------------------------------------------------- > daj, dont post new posts for question that are > already being discussed, have lil patience. sorry, i know i am annoying, but someone who crushed level 1 in december said “do as many problems as you can” so that is why i am a brat. srroy. signing off for some time, see ever1 2nite