A company originally issues 180,000 shares of stock at a price of $22;one year later the stock price is $40 per share,the number of outstanding shares is unchanged,and the company's net income for the year is $230,400.The P/E ratio at the end of the recent year is:
A)0.0002.
B)24.22.
C)31.25.
D)0.0001.

Question

Quizplus · Accepted Answer

EPS = (Net income − Preferred dividends)÷ Average number of common shares outstanding
= $230,400 ÷ 180,000 shares = $1.28 per share
P/E ratio = Current stock price (per share)÷ Earnings per share (annual)
= $40.00 per share ÷ $1.28 per share = 31.25

A Company Originally Issues 180,000 Shares of Stock at a Price