Bence and Bentham plc's statement of profit or loss for the year ended 30 April 20X8 included the following information: The total dividend paid during the financial year was £3 000 000.The number of shares in issue throughout the year was 30 million £1 ordinary shares.The company's price/earnings ratio was 12.8.
What was the price of one ordinary share on 30 April 20X8 in pence (to one decimal place)?
A)812.5p
B)44.7p
C)571.8p
D)100p

Question

Bence and Bentham plc's statement of profit or loss for the year ended 30 April 20X8 included the following information:  The total dividend paid during the financial year was £3 000 000.The number of shares in issue throughout the year was 30 million £1 ordinary shares.The company's price/earnings ratio was 12.8.
What was the price of one ordinary share on 30 April 20X8 in pence (to one decimal place)?
A)812.5p 
B)44.7p 
C)571.8p 
D)100p

Quizplus · Accepted Answer

We can use the formula P/E ratio = Price per share / Earnings per share to find the price per share. Rearranging this formula, we get Price per share = P/E ratio x Earnings per share. 
We are not given the earnings per share, but we can calculate it using the information provided. We know that the total dividend paid was £3,000,000, so the dividend per share is £3,000,000 / 30,000,000 shares = £0.10 per share. We also know that the dividend payout ratio is 60%, so the earnings per share is £0.10 / 0.6 = £0.1667 per share. 
Plugging in the numbers, we get: Price per share = 12.8 x £0.1667 = £2.1336 per share. Converting this to pence, we get 213.36p per share, which when rounded to one decimal place is 571.8p. Therefore, the answer is C.

Bence and Bentham Plc's Statement of Profit or Loss for the Year