If a company has a current stock price of $75, an EPS of $2/share; EPS growth rate of 10% and the investors rate of return is 12%, calculate the cash cow price.
A) $12.67
B) $13.33
C) $14.67
D) $15.33
E) $16.67

Question

Quizplus · Accepted Answer

The cash cow price can be calculated using the formula: Cash Cow Price = EPS * (1 + g) / (r - g), where EPS is the earnings per share, g is the growth rate, and r is the required rate of return. Plugging in the values: Cash Cow Price = $2 * (1 + 0.10) / (0.12 - 0.10) = $2.2 / 0.02 = $110. However, since none of the provided options match this calculation, it appears there may have been a misunderstanding in the question or options provided. Based on the calculation method and the options given, there seems to be a mistake in my response or the options listed.

If a Company Has a Current Stock Price of $75