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 1 year from now it will have 650,000 shares of common stock. assuming fontaine’s price/earnings ratio remains at its current level, what will be its stock price 1 year from now?

$50

Explanation:

Given,

Current Net income = $2,000,000

No. of common shares today = 500,000

Current market price per share = $40

Anticipated Net income in 1 year = $ 3,250,000

Anticipated No. of common shares in 1 year = 500,000 +150000 =650,000

From this data, then

The current Earnings Per Share(EPS) =

Current Price/Earning ratio =

Anticipated EPS in 1 year=

If the company's P/E ratio remain as that of the current at 10, then

The anticipated price of stock in 1 year = Anticipated EPS * P/E ratio in 1 year

 = $5 *10 = $50

answer; ///i believe that the correct answer is (post conventional)

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.