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bezimeni [28]
3 years ago
8

The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchang

ed. What would happen to the company's price-earnings ratio? A. Remain unchanged B. Impossible to determine. C. Increase D. Decrease
Business
1 answer:
WINSTONCH [101]3 years ago
7 0

Answer: Option (C) is correct.

Explanation:

Given that,

Old market price of stock = $15

New market price of stock = $18

Here, we assume that EPS be $5.

So,

Price-earning ratio at old price = \frac{Market\ Price}{EPS}

                                                   =  \frac{15}{5}

                                                   = 3

Price-earning ratio at New price = \frac{Market\ Price}{EPS}

                                                   =  \frac{18}{5}

                                                   = 3.6

Hence, price-earnings ratio increases.

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<h3>What is common-size statement?</h3>

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