Suppose that the MC Software Corporation earns a profit of $10 per share. If the prevailing interest rate is 12 percent and the
1 answer:
Answer:
Price Earning Ratio = Price/Earnings = we use the general formula.
$100/$10 = 10 times
Explanation:
Price Earning ratio is calculated using the current market price of share and earnings per share of the company. In the given question there is no relevance of interest rate as this is not the cost of equity.
Price Earning Ratio tells how much earnings are required to meet the cost of 1 share.
Another formula for P/E ratio = 1/Cost of Equity. Since 12% is not cost of equity this formula cannot be used.
Also earnings per share is given assumed it is after interest cost if any.
You might be interested in
Answer:
8.99%
Explanation:
For this question we use the PMT function that is presented on the excel spreadsheet. Kindly find it below:
Given that,
Present value = $975
Future value = $1,000
Rate of interest = 9.25% ÷ 2 = 4.625%
NPER = 25 years × 2 = 50 years
The formula is shown below:
= PMT(Rate,NPER,-PV,FV,type)
The present value come in negative
So, after solving this, the PMT is $44.96
Now the annual PMT is
= $44.96 × 2
= $89.92
So, the coupon interest rate is
= $89.92 ÷ $1,000
= 8.99%
