Question

A company has net income of $885,000; its weighted-average common shares outstanding are 177,000. Its dividend per share is $1.10, its market price per share is $101, and its book value per share is $95.50. Its price-earnings ratio equals:

Answer 1

20.2 or 20.2:1

Step-by-step explanation:

EPS = Net Income / common shares outstanding

EPS = $885,000 / 177,000 shares

EPS = $5

Market price per share = $101

Price-earnings ratio = Market price per share / EPS

Price-earnings ratio = $101 / $5

Price-earnings ratio = 20.2 or 20.2:1