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5 February, 05:02

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

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  1. 5 February, 07:09
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    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
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