ABC reported EPS of Rs. 2.4 in 2007, and DPS of Rs 1.06. The earnings has grown 7.5 % a year over the prior 5 yrs and were expected to grow 6% a year in the long term ( starting in 2008). The stock has a beta of 1.05 and traded for ten times earnings. The treasury bond rate was 7%. Find a) P/E b) long term growth rate is implied in the firm's current P/E ratio ? c) Value of equity share if P/E is 8 ? The sum is from A N Shridhar book pg no 213 but i am not able to understand how P/E has been calculated ?
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