Question

the apple pie company had net income of $48,000 and earnings per share of $3.67. apple pie declared dividends of $2.50 per share of common stock during 2022. on december 31, 2022, the stock had a market price of $18.00 per share. apple pie's price/earnings ratio is closest to: multiple choice

Answer 1

To calculate the price/earnings ratio of the Apple Pie Company, you divide the market price per share ($18.00) by the earnings per share ($3.67), resulting in a P/E ratio of approximately 4.90.

Step-by-step explanation:

The question is asking to calculate the price/earnings ratio (P/E ratio) for Apple Pie Company, given its net income, earnings per share (EPS), dividends declared, and the market price of its stock. To calculate the P/E ratio, we divide the market price per share by the earnings per share.

The formula for the P/E ratio is:

P/E ratio = Market Price per Share / Earnings per Share

Given that the earnings per share is $3.67 and the market price per share is $18.00, the P/E ratio would be:

P/E ratio = $18.00 / $3.67 ≈ 4.90

Therefore, the P/E ratio of the Apple Pie Company is closest to 4.90.