Acme Widget,Inc.has 1,000 shareholders who own a total of two million shares of its common stock.The stock currently sells for $80 per share.The company earned $8 million after taxes.The annual dividend is $0.50 per share.The company has assets of $125 million and liabilities of $25 million.What is the P-E ratio?
A)10
B)11
C)13
D)20
E)25

Question

Quizplus · Accepted Answer

The P-E (Price-Earnings) ratio is calculated by dividing the market price per share by the earnings per share (EPS). The EPS is calculated as the total earnings divided by the number of shares. Here, EPS = $8 million / 2 million shares = $4 per share. The market price per share is $80. Therefore, the P-E ratio = $80 / $4 = 20.