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user100 [1]
3 years ago
14

Last year, Rec Room Sports reported earnings per share of $9.10 when its stock price was $282.10. This year, its earnings increa

sed by 20 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.)
Business
1 answer:
svetlana [45]3 years ago
6 0

Answer:

The correct answer is "$338.52".

Explanation:

The given values are:

Market price,

= $282.10

Earning per share,

= $9.10

Earning increased,

= 20%

As we know,

⇒  PE \ ratio=\frac{Market \ price}{Earning \ per \ share}

On substituting the given values, we get

⇒                  =\frac{282.10}{9.10}

⇒                  =31

Current year earnings,

=  9.10\times 120 \ percent

=  10.92 \ per \ share

Thus,

⇒ 31=\frac{Market \ price}{10.92}

⇒ Market \ price = 31\times 10.92

⇒                        =338.52 ($)

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