Fabrizio, Inc. is expected to generate earnings of $1.50 per share this year. If the mean ratio of share price to expected earnings of competitors in the same industry is 20, then the stock priceper share is $____.
A) 13.33
B) 3
C) 20
D) 30
E) none of the above

Question

Quizplus · Accepted Answer

If the mean price-to-earnings ratio in the industry is 20, the stock price can be calculated by multiplying the earnings per share by the price-to-earnings ratio:
Stock Price = Earnings per share x Price-to-earnings ratio
Stock Price = $1.50 x 20
Stock Price = $30
Therefore, the stock price per share is $30.