Question

If a firm has the market price of the firm's common stock of $500 and its annual earnings per share of $50 , then the firm has a P/E ratio of.

Answer 1

Answer:

Price / Earning ratio = 10

Explanation:

the P/E ratio will be determinate as follow:

$\frac{Market \: price}{EPS}$

Thus, the P/E will be 500/50 = 10

the price earning ratio stand for the amount of time required to payback the investment. In this case, 10 years as the market value is 500 dollars and eahc year the share earn 50 dollars