Benkart Corporation has sales of $5,000,000,net income of $800,000,total assets of $2,000,000,and 100,000 shares of common stock outstanding.If Benkart's P/E ratio is 12,what is the company's current stock price?

Question

Quizplus · Accepted Answer

To find the stock price, we can use the P/E ratio formula:

P/E ratio = Market Price per Share / Earnings per Share

We know that the P/E ratio is 12, so we can rearrange the formula to solve for the market price per share:

Market Price per Share = P/E ratio x Earnings per Share

We know that the earnings per share equals net income divided by the number of shares outstanding:

Earnings per Share = Net Income / Number of Shares Outstanding

Substituting in the values given:

Earnings per Share = $800,000 / 100,000 = $8

Market Price per Share = 12 x $8 = $96

Therefore, the current stock price for Benkart Corporation is $96 per share, which is option B.

Benkart Corporation Has Sales of $5,000,000,net Income of $800,000,total Assets