Larabee Company's stock sells for $20 per share.The company has $160 million in earnings and 500 million outstanding shares.The Price/Earnings ratio for the company is closest to:
A)62.5.
B)200.
C)0.31.
D)6.4.

Question

Quizplus · Accepted Answer

Earnings per share (EPS)= (Net income − Preferred dividends)÷ Average number of common shares outstanding
= ($160,000,000 − $0)÷ 500,000,000 = $0.32
Price/Earnings ratio = Stock price ÷ EPS
= $20 ÷ $0.32 = 62.5

Larabee Company's Stock Sells for $20 Per Share