Question: A Normal P/E for General Electric? (Easy) In early 2008, General Electric (GE) shares were trading at $26.75 each. Analysts were forecasting $2.21 in EPS for 2008 and $2.30 for 2009. A dividend of $1.24 was indicated for 2008. Use a required return of9 percent for the questions below.
a. What is GE normal forward PIE? What was the PIE at which it traded?
b. The estimated abnormal earnings growth for 2009 indicates that GEs stock should be trading at about a normal P/E. Show this.