Question

If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year and the dividend payout ratio is 40%, what is the stock's current price?

A) $24.30
B) $18.00
C) $22.22
D) $40.50

Answer 1

D) $40.50

Step-by-step explanation:

The computation of the stock current price is as follows:

Stock price is

= Price earning ratio × Earning per share

= 13.5 × $3

= $40.50

Hence, the stock current price is $40.50

Therefore the correct option is d.

We simply applied the above formula so that the correct value could come

And, the same is to be considered