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1 year ago

Company XYZ closed at $46.07 per share with a P/E ratio of 16.66. Answer the following questions.

Mathematics

1 answer:

Andrew [12]1 year ago

8 0

The amount of earnings per share is $2.77.

<h3>Earnings per share</h3>

a. Earnings per share = price per share / (P/E) ratio

Earnings per share = $46.07 / 16.66

Earnings per share= $2.77

B. Overpriced or underpriced stock

At P/E ratio = 12

Earnings per share = $46.07 / 12

Earnings per share = $3.84

Earning yield = ( Earning per share / market value )× 100

Earning yield = (3.84 / $46.07 ) × 100

Earning yield = 8.34%

At P/E ratio = 13

Earnings per share = $46.07 / 13

Earnings per share = $3.54

Earning Yield= (3.54 / 46.07 ) × 100

Earning Yield= 7.68%

At P/E ratio = 14

Earnings per share = $46.07 / 14

Earnings per share = $ 3.3

Earnings yield= ( 3.3 / 46.07 )×100

Earnings yield= 7.16%

Average of earning yield given P/E ratio is 12-14

Average of earning yield= ( 8.34 + 7.68 + 7.16 ) / 3

Average of earning yield= 7.73%

Earning yield = ( Earning per share / market value ) × 100

Earning yield= ( 2.77 / 46.07 ) ×100

Earning yield = 6.01%

Hence, Based on the above the stock is underpriced.

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Company XYZ closed at ​$46.07 per share with a​ P/E ratio of 16.66. Answer the following questions.

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