Question

A firm has a reported enterprise value of $42.00 billion. The firm has $12.00 billion of debt on its balance sheet, and $1.00 billion in cash. The firm also reports $6.00 billion in shareholder equity with 500.00 million shares outstanding. Finally, the firm reported $773.00 million in net income last year.

What is the P/E ratio for the firm?

Answer 1

PE Ratio = 40.10

Step-by-step explanation:

given data

enterprise value = $42.00 billion

debt = $12.00 billion

cash = $1.00 billion

shareholder equity = $6.00 billion

Shares outstanding = 500.00 million

net income = $773.00 million

solution

we get here Market Value of Equity that is express as

Market Value of Equity = Enterprise Value - Debt + Cash ................1

Market Value of Equity = $42 - $12 + $1

Market Value of Equity = $31 billion

and now we get Price per Share

Price per Share =
`(price\ per\ share)/(share\ outstanding)` .............2

Price per Share =
`(31)/(0.5)`

Price per Share = $62

and

Earnings per Share will be here as

Earnings per Share =
`(net\ income)/(share\ outstanding)` ..................3

Earnings per Share =
`(773)/(500)`

Earnings per Share = 1.546

so PE Ratio will be

PE Ratio =
`(62)/(1.546)`

so here PE Ratio = 40.10