Ratios: Price-Earnings Ratio (PE Ratio) Video Lessons

Concept

# Problem: 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

###### Problem Details

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