Lake Incorporated and the River, Incorporated reported net incomes of $204,000 and $164,000, respectively, for the most
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Question:
Lake Incorporated and the River, Incorporated reported net incomes of $204,000 and $164,000, respectively, for the most recent fiscal year. Both companies had 40,000 shares of common stock issued and outstanding. The market price per share of Lakes stock was $67, while Rivers sold for $71 per share. Required a. Determine the P/E ratio for each company. b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in income?
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