Question

Vriend Software incorporated's book value per share is $14.80. If eamings per share is $177, and the firm's stock trades in the stock market at 2.5 times book value per share. What will the P/E ratio be? Note: Do not round intermediote calculations. Round your finol answer to 2 decimal places.

Answer 1

To determine the P/E ratio for Vriend Software Incorporated, the stock price is calculated as 2.5 times the book value of $14.80, leading to $37.00 per share. The P/E ratio is then found by dividing this price by the earnings per share of $177, resulting in a P/E ratio of 0.21.

Step-by-step explanation:

The subject of the question is determining the P/E ratio (price-to-earnings ratio) for Vriend Software Incorporated. To find the P/E ratio, we first need to calculate the stock price by multiplying the book value per share by the factor the stock trades at in the stock market, which is 2.5 times. Hence, the stock price is $14.80 * 2.5 = $37.00. Earnings per share (EPS) is given as $177. The P/E ratio is calculated by dividing the current stock price by the EPS. Therefore, P/E ratio = $37.00 / $177 = 0.209 which, when rounded to two decimal places, is 0.21.