Problem:
Fontaine Inc. recently reported net income of $2 million. It has 500, 000 shares of common stock, which currently trades at $40 a share. Fontaine continues to expand and anticipates that 1 year from now, its net income will be $3.25 million. Over the next year, it also anticipates issuing an additional 150,000 shares of stock so that one year from now it will have 650,000 shares of common stock.
Required:
Question: Assuming Fontaine's price/earnings ratio remains at its current level, what will be its stock price 1 year from now?
Note: Explain all steps comprehensively.