Question

A company has net income of $925,000; its weighted-average common shares outstanding are 185,000. Its dividend per share is $0.70, its market price per share is $93, and its book value per share is $83.50. Its price-earnings ratio equals:

Answer 1

$18.60

Step-by-step explanation:

Calculation for the price-earnings ratio

Using this formula

Price-Earnings Ratio = Market Price per Share/ Earnings per share

The Earnings per share will be Net Income/(Weighted-Average Common Shares Outstanding)

Let plug in the formula

Price-Earnings Ratio = $93 / ($925,000 / 185,000)

Price-Earnings Ratio=$93/5

Price-Earnings Ratio=$18.60

Therefore the price-earnings ratio will be $18.60