PacknCamp Corporation has a stock price of $50,has issued 2,000,000 shares of stock,has retained earnings of $4 million dollars,and a dividend yield of 4 percent.The price-earnings ratio of PacknCamp is

Question

Quizplus · Accepted Answer

To calculate the price-earnings ratio, we need to divide the stock price by the earnings per share. Since we are not given the earnings per share, we cannot calculate the exact price-earnings ratio. However, we can make an estimate based on the dividend yield. If the dividend yield is 4 percent, then we can assume that the earnings per share are also around 4 percent of the stock price. Therefore, the earnings per share would be $2 ($50 x 4%). To calculate the price-earnings ratio, we would divide the stock price by the earnings per share, which gives us a ratio of 25. However, this is high compared to historical standards of the market. Therefore, the best choice is C, which gives a lower price-earnings ratio of 12.5, which is more in line with historical standards of the market.

PacknCamp Corporation Has a Stock Price of $50,has Issued 2,000,000