No-Growth Industries pays out all of its earnings as dividends.?

Question

It will pay its next $4 per share dividend in a year. The discount rate is 12 percent.
What is the price-earnings ratio of the company?
What would the P/E ratio be if the discount rate were 10 percent?

Answer 1

You should really do your own homework, but I think these are kind of fun, so I'll do this one too. No more,though...

First calculate price:
4/.12=$33.33
So the P/E is 33.33/4 =8.33

If the discount rate were 10%:
First calculate price:
4/.10=$40
So the P/E is 40/4 =10