Ask Question
7 April, 00:14

Perine, Inc., has balance sheet equity of $6 million. At the same time, the income statement shows net income of $906,000. The company paid dividends of $480,180 and has 200,000 shares of stock outstanding. If the benchmark PE ratio is 24, what is the target stock price in one year? Assume the firm will grow at the sustainable growth rate. (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

+1
Answers (1)
  1. 7 April, 00:22
    0
    The target stock price in year 1 is $51.12

    Explanation:

    Given SE = $6 MIL, NI = $906 000, Div = $408180, Shares = 200000, PE ratio = 24, SP = ?

    W e will use the price earning ratio as we are are given the benchmark PE ratio and this ratio measures the stock price relative to it profits

    PE = Stock price / Earnings per share

    Need to calculate Earnings per share

    EPS = net Income - dividends / oustanding Shares

    =906000-480180/200000

    =$2.1291/$2.13

    Sustitute in the formula for PE ratio

    24 = Stock Price/2.13

    Stock Price = $51.12

    Therefore the target stock price in year 1 is $51.12
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Perine, Inc., has balance sheet equity of $6 million. At the same time, the income statement shows net income of $906,000. The company paid ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers