Company Z has sales of $3,000,000, net income of $600,000, total assets of $1,000,000 and 800,000 shares of common stock outstan

Question

Yuliya22 [10]

3 years ago

7

Company Z has sales of $3,000,000, net income of $600,000, total assets of $1,000,000 and 800,000 shares of common stock outstan

ding. If Company Z's P/E ratio is 25, what is the company's current stock price

Business

1 answer:

Marizza181 [45] · Answer 1 · 2022-11-17T05:57:04+03:00

Answer:

Price per share = $18.75

Explanation:

The P/E ratio is the measure of how much the investor's are willing to pay for every $1 earnings of the stock. The p/e ratio is calculated by dividing the price per share of the stock by the earnings per share. The formula for p/e ratio is as follows,

P/E ratio = Price per share / Earnings per share

Earnings per share = Net Income / Number of Common stock outstanding

Earnings per share = 600000 / 800000 = 0.75 per share

25 = Price per share / 0.75

25 * 0.75 = Price per share

Price per share = $18.75