Question

Select the correct answer.

Drake owns 100 stocks of Balancia, Inc. He had bought these stocks at a face value of $10. The market price of these stocks is now $50 each.

Balancia has declared a dividend of 20% this year. Balancia's retained earnings for the year is $2,000,000 and it has 1,000,000 outstanding

stocks. What is the P/E Ratio?

Answer 1

A. 25

Explanation:

correct on plato

Answer 2

Answer: 25

Explanation:

The Price to Earnings ratio, AKA, the P/E ratio, is calculated by dividing the Market price of the stock by the Earnings per share.

Earnings per share = Net earnings for the year / Number of shares

= 2,000,000 / 1,000,000

= $2 per share

P/E ratio = Market price of shares/ Earnings per share

= 50 / 2

= 25