Legacy Industries Inc. has a historic P/E multiple of 15, a current EP

Legacy Industries Inc. has a historic P/E multiple of 15, a current EPS of $2.50 projected to grow by 4% in the coming year, and a forward looking P/E multiple of 18. With this information please estimate the current price of the firm’s stock.

A) $37.50
B) $46.80
C) $39.00
D) $48.20

ANSWER

B
Explanation: B) P = D1 * multiple = $2.50 * (1.04 ) * 18 = $46.80.