At a time when the market P/E ratio is 21, Kaperr Security has a relative P/E of .7 and EPS of $3.00. The price of Kaperr stock is
A) $63.00.
B) $90.00.
C) $44.10.
D) $21.00.

Question

Quizplus · Accepted Answer

The price of Kaperr stock is calculated by multiplying the market P/E ratio by the relative P/E of Kaperr and then by the EPS of Kaperr. So, the calculation is 21 (market P/E) * 0.7 (relative P/E) * $3.00 (EPS) = $44.10.

At a Time When the Market P/E Ratio Is 21