In 2013,XYZ Corporation had total earnings of $500 million and XYZ retained 20 percent of its earnings for future investments.If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding,then what is the price-earnings ratio?
A)6.25
B)11.2
C)14.0
D)17.5

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the price per share by the earnings per share (EPS). First, calculate the EPS: Total earnings are $500 million, and with 100 million shares, EPS = $500 million / 100 million shares = $5 per share. The price per share is $70, so the P/E ratio = $70 / $5 = 14.0.

In 2013,XYZ Corporation Had Total Earnings of $500 Million and XYZ