Calculate net income given the following information: shares outstanding = 1,250,000; stock price = $35/share; PE ratio = 12.50.
A) $2,500,000
B) $2,750,000
C) $3,000,000
D) $3,250,000
E) $3,500,000

Question

Quizplus · Accepted Answer

The net income can be calculated by first determining the market capitalization, which is shares outstanding multiplied by stock price (1,250,000 * $35 = $43,750,000). Then, using the PE ratio formula (Market Cap = Net Income * PE Ratio), we can solve for Net Income = Market Cap / PE Ratio = $43,750,000 / 12.50 = $3,500,000.

Calculate Net Income Given the Following Information: Shares Outstanding =