Question

A company has net income of $90,000; its weighted-average common shares outstanding are 18,000. Its dividend per share is $0.45, its market price per share is $88, and its book value per share is $76. Its price-earnings ratio equals___________.a. 90b. 176c. 12.5 d. 15.2

Answer 1

Answer:

b. 17.6

Explanation:

Earning Per share = Net Income / Weighted average outstanding share

Earning Per share = $90,000 / 18,000 = $5 per share

Price earning ratio = Share market price / Earning per share

Price earning ratio = $88 / $5 = 17.6

* Options are inconsistent with the data given

Or

The option b. 176 is wrong, it is missing point between 7 and 6 and will be correctly written as b. 17.6

Answer 2

Answer:

Option B is correct (17.6)

Price-earnings ratio=17.6

Explanation:

option B is correct (17.6)

Given Data:

Net income=$90,000

Weighted-average common shares outstanding=18,000

Market price per share=$88

Book value per share=$76

Required:

Price-earnings ratio=?

Solution:

Formula:

Price-earnings ratio=$\frac{Market\ price\ per\Share}{\frac{Net\ Income}{ weighted\ -\ average\ common \ shares\ outstanding } }$

Price-earnings ratio=$\frac{\ 88}{\frac{\ 90,000}{18,000}}$

Price-earnings ratio=17.6