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Fontaine Inc. recently reported net income of $2 million. It has 500, 000 shares of common stock, which currently trades at $40 a share. Fontaine continues to expand and anticipates that 1 year from now, its net income will be $3.25 million. Over the next year, it also anticipates issuing an additional 150,000 shares of stock so that one year from now it will have 650,000 shares of common stock.

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Question: Assuming Fontaine's price/earnings ratio remains at its current level, what will be its stock price 1 year from now?

Note: Explain all steps comprehensively.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168284

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