1. 

   BeckerUser
   

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   Not sure why I'm having such a difficult time with P/E ratio when it is simply (P/E) x E. Anyway, this problem from Becker asks for the PEG ratio. But looking through the "incorrect" answers, it says letter C uses the P/E ratio rather than the PEG ratio. How is Becker coming up with 256 as the P/E ratio?

   Iota Corp. is using the PEG ratio to forecast its stock price in the coming year. The company's current price and EPS are $100 and $10, respectively. Growth is expected to be 2.5%. What is the projected stock price?

   a. 100
   b. 102
   c. 256
   d. 263

   Choice "c" is incorrect. The proposed solution uses the P/E ratio rather than the PEG ratio.

   WHY?

   REG - 80
   FAR - 78
   AUD - 86
   BEC - 83
   
   Material: Becker
   Time Taken: 6 Months

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   Posted 6 months ago #
2. 

   BeckerUser
   

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   Any takers to solve this?

   REG - 80
   FAR - 78
   AUD - 86
   BEC - 83
   
   Material: Becker
   Time Taken: 6 Months

   Posted 6 months ago #
3. 

   luis
   

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   Read:

   http://www.becker.com/accounting/cpaexamreview/students/2011%20Business%203%20Update.pdf

   Page 2

   Posted 6 months ago #
4. 

   diesuperfly
   

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   I actually just did this problem.

   Call of the question is what is the stock price (today)

   Stock Price Today = P0 (the 0 is a subscipt)

   P0=PEG X E1 X G

   P0 = (P0 / E0 / G ) X E1 X G

   So we know ....

   E1 = the EPS in 1 yr so use this year's eps and multiply it by the growth rate
   E1= E0 X (1+g)
   =(10 X (1+.025)
   =10.25

   so.....

   P0 = (P0 / E0 / G ) X E1 X G
   = (100/ 10/ 2.5) X (10 X (1+.025) X 2.5
   = 4 X 10.25 X 2.5
   = 102.50

   The only thing I cant explain is why 2.5 inside peg is not .025 or 2.5% it makes no sense to me but I've moved on because you prob wont be seeing this question anyways and its not hard to remember. Just think of G = 2.5 and g =2.5% or .025 and youll be fine.

   The thing you have to remember is PEG is easy its P/E/G right?

   But we are using PEG to get the P0 also know as the stock price TODAY!

   Posted 6 months ago #
5. 

   CPA-Convertible
   

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   @ Luis - Thanks for the posting the link for the corrected answer. I was working on it last night and had problem with it too.
   Anyway, I have this whole thing puzzled by this PEG, P/E things. The way I think and calculate this kinda question is:
   Current Price = $100, Expected Grow Rate = 2.5%, SO, the expected future price should be = $100 * (1+2.5%) = 102.5! No need to divide the E or G since you are going to multiple them back anyway!!!??? Someone please explain or correct me if I missed anything on my calculation. Thanks a bunch!

   AUD - Passed - 8-31-11
   BEC - Passed - 11-29-11
   FAR - Passed - 2-29-12
   & REG - Scheduled - 5/31/12

   Posted 6 months ago #

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