Problem:

Assume that the current price is $50.23. Also, assume Badger Meter's trailing 12 months earnings is exactly $1.82, which implies that its priced divided by trailing 12 month earnings 27.6.

Required:

Question: If earnings are $2.22 over the 12 months ended in one year as projected by consensus, and P/E falls to 24.0 by the end of the 12 months, what is the price return on the stock over the next 12 months?

a) -22.0%,

b) -11.8%

c) 6.1%,

d) 9.0%,

e) 35.0%

f) 37.9%

Note: Be sure to show how you arrived at your answer.