(including preferred stock) of $45 million, and 1,000,000 shares of common stock outstanding. Next year, ABC is projecting that it will have net income of $1.5 million. If the average P/E multiple in ABC's industry is 15, what should be the price of ABC's stock?

(including preferred stock) of $45 million, and 1,000,000 shares of common stock outstanding. Next year, ABC is projecting that it will have net income of $1.5 million. If the average P/E multiple in ABC's industry is 15, what should be the price of ABC's stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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Question

At year-end, ABC Company balance sheet showed total assets of $60 million, total liabilities
(including preferred stock) of $45 million, and 1,000,000 shares of common stock outstanding. Next
year, ABC is projecting that it will have net income of $1.5 million. If the average P/E multiple in
ABC's industry is 15, what should be the price of ABC's stock?
$25.00
None of the given answers is correct
$23.99
$22.50
Ⓒ$27.64

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