Alexas Corporation reports the following:
$$\begin{array} { l l }
& \mathbf { 2 0 0 5 } \
\text { Earnings per share } & \$ 1.80 \
\text { Dividends per share } & \$ 0.72 \
\text { Book value per share- at the end of the } &\$ 8.62\
\text { year } &
\end{array}$$
-If price-to-book ratio at the end of 2005 equals 1.00, then PE ratio at end of 2004 equals (pick closest number):
A)8.38.
B)4.78.
C)4.19.
D)Not determinable

Question

Alexas Corporation reports the following:
 $$\begin{array} { l l } 
& \mathbf { 2 0 0 5 } \
\text { Earnings per share } & \$ 1.80 \
\text { Dividends per share } & \$ 0.72 \
\text { Book value per share- at the end of the } &\$ 8.62\
\text { year } & 
\end{array}$$
-If price-to-book ratio at the end of 2005 equals 1.00, then PE ratio at end of 2004 equals (pick closest number):
A)8.38.
B)4.78.
C)4.19.
D)Not determinable

Quizplus · Accepted Answer

The price-to-book ratio of 1.00 implies the stock price equals the book value per share, which is $8.62. The PE ratio is calculated as the stock price divided by earnings per share: $8.62 / $1.80 = 4.79, which is closest to option C.

Alexas Corporation Reports the Following -If Price-To-Book Ratio at the End of 2005 Equals 1