Benny is considering investing in Larkman,Inc.The current price of Larkman is $62 a share,the after-tax earnings are $37,900,000,and there are 13,000,000 outstanding shares of common stock.What is Larkman's price/earnings ratio?

Question

Quizplus · Accepted Answer

To calculate the price/earnings ratio, we divide the current price per share by the earnings per share (EPS). To find the EPS, we divide the total after-tax earnings by the number of outstanding shares:
EPS = $37,900,000 / 13,000,000 shares = $2.92 per share
Therefore, the price/earnings ratio is:
P/E ratio = $62 / $2.92 = 21.3
So the closest option to this value is option B, which is the correct answer.

Benny Is Considering Investing in Larkman,Inc