Question

A company has net income of $940,000; its weighted-average common shares outstanding are 188,000. Its dividend per share is $0.85, its market price per share is $96, and its book value per share is $88.00. Its price-earnings ratio equals?

Answer 1

19.2

Explanation:

Net income $940,000

No of shares outstanding $188,000

Earning per share = Net income / no of shares outstanding

Earning per share = 940,000 / 188,000

Earning per share = 5

Market price per share = 96

Price earning ratio = Market price / Earning per share

Price earning ratio = 96 / 5

Price earning ratio = 19.2