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Last year, Rec Room Sports reported earnings per share of $7.60 when its stock price was...

Last year, Rec Room Sports reported earnings per share of $7.60 when its stock price was $121.60. This year, its earnings increased by 25 percent. If the P/E ratio remains constant, what is likely to be the price of the Stock? (Round your answer to 2 decimal places.)

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Expert Solution

PE ratio = Market price / EPS = $121.60 / $7.60 = 16

This year earnings = $7.60 * 125% = $9.50

Market price = PE ratio * EPS = 16 * $9.50 = $152.00

jeff jeffy answered 2 years ago
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