A company has net income of $90,000; its weighted-average common shares outstanding are 18,000.Its dividend per share is $0.45,its market price per share is $88,and its book value per share is $76.Its price-earnings ratio equals:
A)9.0.
B)17.6.
C)12.5.
D)15.2.
E)16.9.

Question

Quizplus · Accepted Answer

To find the price-earnings ratio, we need to divide the market price per share by the earnings per share (EPS).

EPS = Net Income / Weighted-average common shares outstanding = $90,000 / 18,000 = $5 per share

Therefore, the price-earnings ratio is:

P/E ratio = Market Price per share / EPS = $88 / $5 = 17.6

Therefore, the best choice is B.

A Company Has Net Income of $90,000; Its Weighted-Average Common