Biz Enterprises has expected net income of $1,575,000 next year. The firm has 900,000 shares outstanding....

Biz Enterprises has expected net income of $1,575,000 next year. The firm has 900,000 shares outstanding. The firm expect to maintain the same P/E ratio as the industry of 26.5 in the future and market-to-book ratio of 30. What is the firm's expected price next year?

Expert Solution

Expected EPS = Net Income / Shares outstanding

= 1575000 / 900000

= 1.75

PE Ratio = Market price / Expected EPS

Market rice = 26.50 * 1.75

= 46.38

jeff jeffy answered 2 years ago

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