Assume General Electric (GE) has about 10.3 billion shares outstanding and the stock price is $37.10.Also, assume the P/E ratio is about 18.3.Calculate the approximate market capitalization for GE.

Question

Quizplus · Accepted Answer

Market capitalization (Market Cap) can be calculated as:

Market Cap = Total outstanding shares * Stock price

So, for GE:

Market Cap = 10.3 billion * $37.10 = $381.73 billion

Now, since the P/E ratio is given as 18.3, we can use it to get an estimate of the company's earnings:

P/E ratio = Stock price / Earnings per share

Rearranging we get:

Earnings per share = Stock price / P/E ratio

Earnings per share = $37.10 / 18.3 = $2.03

Now, to get an estimate of the company's earnings (E), we can multiply the earnings per share by the total outstanding shares:

E = Earnings per share * Total outstanding shares

E = $2.03 * 10.3 billion = $20.91 billion

So, the company's market capitalization of $381.73 billion divided by its earnings of $20.91 billion gives us a P/E ratio of:

P/E ratio = Market Cap / Earnings

P/E ratio = $381.73 billion / $20.91 billion = 18.25

Since the given P/E ratio is approximately 18.3, this seems reasonable. Therefore, the best choice is C, $382 billion.

Assume General Electric (GE) Has About 10