Question

If a stock has earning of $6,000,000.00 with 9 million outstanding shares and has a P/E ratio of $23.25 what is the closing price of the stock?

Answer 1

The closing price of the stock = $15.50

Explanation:

Price-earnings (P/E) ratio = 23.25

Earnings per share = total earnings/total number of shares

Earnings per share = 6,000,000/9,000,000 = 0.666667

E = $0.666667 per share

Price per share/Earnings per share = 23.25

Price per share = 23.25* Earnings per share = 23.25*0.666667 = $15.50

The closing price of the stock = $15.50