ABC Inc. has 125,000 shares of stock outstanding, sales of $1,200,000 and net income of $152,000. If the P/E ratio of the stock is 15.5, what is the current stock price?

Question

Quizplus · Accepted Answer

First, calculate the earnings per share (EPS) by dividing the net income by the number of shares outstanding: $152,000 / 125,000 = $1.216. Then, multiply the EPS by the P/E ratio to find the stock price: $1.216 * 15.5 = $18.848, which rounds to $18.85.

ABC Inc Has 125,000 Shares of Stock Outstanding, Sales of $1,200,000