Fast-Tech Corp's common shares have a market value of $63.The corporation's net income is $1,350,000 and the total number of shares outstanding is 450,000.The price-earnings ratio is:
A) 20.9.
B) 4.2.
C) 21.0.
D) 24.0.
E) 6.8.

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the market value per share by the earnings per share. The earnings per share can be found by dividing the net income by the total number of shares outstanding.

EPS = Net income / Total number of shares
EPS = 1,350,000 / 450,000
EPS = 3

P/E ratio = Market value per share / Earnings per share
P/E ratio = 63 / 3
P/E ratio = 21

Therefore, the P/E ratio is 21.0. The correct answer is C.

Fast-Tech Corp's Common Shares Have a Market Value of $63