(Solution) - In early 2008 General Electric GE shares were trading at -(2025 Original AI-Free Solution)

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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 of 9 percent for the questions below.
a. What is GE's normal forward P/E? What was the P/E at which it traded?
b. The estimated abnormal earnings growth for 2009 indicates that GE's stock should be trading at about a normal P/E. Show this.