Perine, Inc., has balance sheet equity of $6.8 million. At the same time, the income statement shows net income of $815,000. The company paid dividends of $285,000 and has 245,000 shares of stock outstanding. If the benchmark PE ratio is 16, what is the target stock price in one year

Question

Business

Grady Hudson

18 February, 23:43

Perine, Inc., has balance sheet equity of $6.8 million. At the same time, the income statement shows net income of $815,000. The company paid dividends of $285,000 and has 245,000 shares of stock outstanding. If the benchmark PE ratio is 16, what is the target stock price in one year

+5

Answers (1)

Know the Answer?

Theodore Mueller · Answer 1

Share price = $53.22

Explanation:

The price of a share can determined using the price-earning ratio.

The ratio relates the price of a stock to its earning. A stock with a higher P/R indicates a high potential for growth.

Price of stock = Earnings per share (EPS) * comparative P/E ratio

Using this model, the price is determined as follows:

EPS = Net Income/No of shares

EPS = 815,000/245,000

= 3.326530612

Share price = 3.326530612 * 16 = 53.22

Share price = $53.22