Compute Earnings Growth: Input Values
The stock-price formula is
P = D(1+s)/(1+r) + D(1+s)2/(1+r)2 + ... + D(1+s)T/(1+r)T + E(1+g)TZ/(1+r)T
April 7, 2011, actual values. Enter others if desired.
S&P price at the beginning of the horizon (P)
Dividend value at the beginning of the horizon (D)
Earnings value at the beginning of the horizon (E)
Profit-GDP ratio at the beginning of the horizon
Values to be computed:
? Growth rate of earnings (g)
? Profit-GDP ratio at the end of the horizon
? S&P price at the end of the horizon
Your input values:
Length of horizon (T)
Discount rate (r)
Growth rate of dividends (s)
PE ratio at the end of the horizon (Z)
Growth rate of nominal GDP