The Bellagio Corporation recently reported net income of $2,000,000. It has 500,000 shares of common stock, which currently trades at $60 a share. Bellagio continues to expand and expects that 1 year from now its net income will be $2,750,000. Over the next year it also anticipates issuing an additional 200,000 shares of stock, so that 1 year from now it will have 700,000 shares of common stock. Assuming its price/earnings ratio remains at its current level, what will be its stock price 1 year from now?

a. $82.50

b. $42.86

c. $60.00

d. $58.93

e. $61.09

Frequently Asked Questions

What scientific concept do you need to know in order to solve this problem?

Our tutors have indicated that to solve this problem you will need to apply the Ratios: Price-Earnings Ratio (PE Ratio) concept. You can view video lessons to learn Ratios: Price-Earnings Ratio (PE Ratio). Or if you need more Ratios: Price-Earnings Ratio (PE Ratio) practice, you can also practice Ratios: Price-Earnings Ratio (PE Ratio) practice problems.

What is the difficulty of this problem?

Our tutors rated the difficulty of*The Bellagio Corporation recently reported net income of $2,...*as high difficulty.