Question

​Fabrizio, Inc. is expected to generate earnings of $1.50 per share this year. If the mean ratio of share price to expected earnings of competitors in the same industry is 20, then the stock price per share is $____.

Answer 1

The stock price per share for Fabrizio, Inc. is calculated by multiplying the earnings per share ($1.50) by the price-to-earnings ratio (20), which equals $30.00 per share.

Step-by-step explanation:

In the scenario provided, Fabrizio, Inc. is expected to generate earnings of $1.50 per share this year. To find the stock price per share, we use the industry average price-to-earnings ratio (P/E ratio), which is given as 20. By multiplying the earnings per share by the P/E ratio, we get the stock price per share.

Stock Price per Share = Earnings per Share × P/E Ratio


= $1.50 × 20


= $30.00

Therefore, the stock price per share for Fabrizio, Inc. would be $30.00 based on the industry average P/E ratio.

Answer 2

$ 30

Step-by-step explanation:

Given data in the question:

The earning expected to be generated = $ 1.50 per share

Mean ratio of share price to expected earnings = 20

Now,

the Stock price per share is calculated as :

Stock price per share = Mean ratio of share price to expected earnings × earning expected to be generated

on substituting the values, we have

Stock price per share = 20 × $ 1.50 = $ 30