Question

PRICE/EARNINGS RATIO A company has an EPS of $2.40, a book value per share of $21.84, and a market/book ratio of 2.73. What is its P/E ratio?

Answer 1

Answer:

24.84 times

Explanation:

The computation is shown below:

Market to book ratio would be

Market to book ratio = (Market price per share) ÷ (book value per share)

2.73 =  Market price per share ÷ $21.84

So, the Market price per share would be

= 2.73 × $21.84

= $59.62

And

Price-earnings ratio = (Market price per share) ÷ (Earning per share)

                                  = ($59.62) ÷ ($2.40)

                                  = 24.84 times