dean brothers inc recently reported net income od $1,500,000. the company has 30

Question

dean brothers inc recently reported net income od $1,500,000. the company has 300,000 shares of common stock. the stock currently trades at $60 a share. the company continues to expand and anticipates that 1 yesr from now its net income will be $2,500,000. over the next year the company also anticipates issuing an additional 100,000 shares of stock. so that one year from now the company will have 400,000 shares of common stock. assuming the company's price/earnings ratio remains at its current level, what will be the company's stock price one year from now?

A. $75

B. $65

C. $80

D. $70

Explanation / Answer

current P/E = 60 / ( 1500000 / 300000 ) = 12

future P/ E is 12

12 = x / ( 2500000 / 400000 )

x = 12 * 2500000 / 400000 = 75

Hence

A. $75

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.