Cute camel woodcraft company just reported earnings after tax (also called net income) of $9,250,000 and a current stock price of $39.50 per share. the company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 3,000,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,500,000). if cute camel's forecast turns out to be correct and its price-to-earnings (p/e) ratio does not change, what does the company's management expect its stock price to be one year from now?

Current Price $39.50

Current Earnings = 9,250,000

Current EPS= 9,250,000/5,500,000= $1.681

Current P/E = 39.5/1.681=23.5

Next year Income =1.25*9250000=11,562,500

Next year No of shares= 8,500,000

EPS= 11,562,500/8500000=1.36

IF PE Ratio remains the same

23.5=Price/1.36

Price= 23.5*1.36= $31.9

Explanation:

The answer is: A) by purchasing an equal number of shares of each stock in the S&P 500 in proportion to the price weight of the stock in the S&P 500

Explanation:

The Vanguard 500 Index Fund Investor Shares (VFINX) attempts to provide investors with return rates corresponding to the S&P 500 Index performance. To do so, the VFINX invests in stocks included in the S&P 500 in the same proportion as their weight in the index. Because of this, the VFINX has an extremely high degree of positive correlation with the S&P 500.