Answer to Question #25840 in Economics of Enterprise for Christie

Question

Plush Pilots, Inc., has balance sheet equity of $6.6 million. At the same time, the income statement shows net income of $798,600. The company paid dividends of $403,293 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 30, what is the target stock price in one year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Target stock price $

Answer 1

PE ratio = stock price/earnings per share, so Stock price = Dividends/shares outstanding*PE ratio
& Target stock price = $403,293/100,000*30 = $120.99