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

Question

Quizplus · Accepted Answer

The P/E ratio is calculated as the market price per share divided by the earnings per share (EPS). The EPS is the net income divided by the number of shares. Here, EPS = $230,400 / 180,000 = $1.28. The P/E ratio = $40 / $1.28 = 31.25.

A Company Originally Issues 180,000 Shares at a Price of $22;