Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4.4 P/E and Stock Price: Fontaine Inc. recently reported net income of $2 million. It has 500,000 shares of a common stock, which currently trades

image text in transcribed

4.4 P/E and Stock Price: Fontaine Inc. recently reported net income of $2 million. It has 500,000 shares of a common stock, which currently trades at $40 a share. Fontaine continues to expand and anticipates that 1 year from now its net income will be $3.25 million. Over the next year, it also anticipates that 1 year from now, its net income will be $3.25 million. Over the next year, it also anticipates issuing an additional 150 shares of stock so that 1 year from now it will have 650,000 shares of common stock. Assuming Fontaine's price/ earnings ratio remains at its current level, what will be its stock price 1 year from now

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Workbook

Authors: Tim Koller, Marc Goedhart, David Wessels, Jeffrey P. Lessard, McKinsey & Company

4th Edition

0471702161, 978-0471702160

More Books

Students also viewed these Finance questions