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During 2022, Amazing Corp.reported after-tax net income of $900,000 and paid $175,000 in common dividends.The weighted average number of common shares issued in 2022 was 200,000.There are no preferred shares issued.At year end, Amazing's common shares are selling for $81 per share on the Toronto Stock Exchange.
-Amazing's price-earnings ratio is
A)180 times.
B)12 times.
C)18 times.
D)6 times.

Question

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During 2022, Amazing Corp.reported after-tax net income of $900,000 and paid $175,000 in common dividends.The weighted average number of common shares issued in 2022 was 200,000.There are no preferred shares issued.At year end, Amazing's common shares are selling for $81 per share on the Toronto Stock Exchange.
-Amazing's price-earnings ratio is
A)180 times.
B)12 times.
C)18 times.
D)6 times.

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market price per share by the earnings per share (EPS). EPS is calculated as net income divided by the weighted average number of common shares. EPS = $900,000 / 200,000 = $4.50. The price-earnings ratio = $81 / $4.50 = 18 times.

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