Determine the net income of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; stock price of "comparable" firm = $30.00; and 300,000 shares of stock outstanding for the comparable firm.

Question

Quizplus · Accepted Answer

The net income of the comparable firm is $500,000. This is calculated by multiplying the stock price by the number of shares outstanding and then multiplying that number by the net income per share. In this case, the net income per share is $200,000 / 300,000 = $0.67. Therefore, the net income of the comparable firm is $30.00 * 300,000 * $0.67 = $500,000.

Determine the Net Income of a "Comparable" Firm Based on the Following