Plush Pilots, Inc., has balance sheet equity of $5.1 million. At the same time,
ID: 2651107 • Letter: P
Question
Plush Pilots, Inc., has balance sheet equity of $5.1 million. At the same time, the income statement shows net income of $724,200. The company paid dividends of $416,415 and has 150,000 shares of stock outstanding. If the benchmark PE ratio is 20, what is the target stock price in one year? (D
Plush Pilots, Inc., has balance sheet equity of $5.1 million. At the same time, the income statement shows net income of $724,200. The company paid dividends of $416,415 and has 150,000 shares of stock outstanding. If the benchmark PE ratio is 20, what is the target stock price in one year? (D
Explanation / Answer
Answer
Figures in $
Particulars
Amount
Net income
a
724200
Shares of stock outstanding
b
150000
Earnings per share (a/b)
c
4.8280
Benchmark PE ratio
d
20
Market price of share (c*d)
e
96.56
Answer : The target stock price in one year is $ 96.56
Alternate Answer
You can also take Dividend per share (total dividend paid/ No of shares outstanding) instead of earnings per share in above table to calculate target stock price in one year ( i.e. 416415/150000 *20) = $ 55.52
Figures in $
Particulars
Amount
Net income
a
724200
Shares of stock outstanding
b
150000
Earnings per share (a/b)
c
4.8280
Benchmark PE ratio
d
20
Market price of share (c*d)
e
96.56