Calculate net income given the following information: shares outstanding = 1,000,000; stock price = $18/share; PE ratio = 20.
A) $750,000
B) $800,000
C) $850,000
D) $900,000
E) $950,000

Question

Quizplus · Accepted Answer

The net income can be calculated by first determining the market capitalization, which is shares outstanding multiplied by stock price (1,000,000 * $18 = $18,000,000). Then, using the PE ratio formula (Market Cap = Net Income * PE Ratio), we can solve for Net Income = Market Cap / PE Ratio = $18,000,000 / 20 = $900,000.

Calculate Net Income Given the Following Information: Shares Outstanding =