Morrison Inc. has a price-cash flow ratio of 12.1. The company has depreciation of $265,000 and 190,000 shares outstanding. If the stock currently sells for $43 per share, what are earnings per share?

Question

Quizplus · Accepted Answer

Price-cash flow ratio = Price per share / Cash flow per share
12.1 = $43 / Cash flow per share
Cash flow per share = $3.55

Depreciation per share = Depreciation / Number of shares outstanding
Depreciation per share = $265,000 / 190,000 = $1.39

Earnings before interest and taxes (EBIT) = Cash flow + Depreciation
EBIT = $3.55 + $1.39 = $4.94

Earnings per share (EPS) = EBIT / Number of shares outstanding
EPS = $4.94 / 190,000 = $0.026
EPS = $2.16

Therefore, the earnings per share for Morrison Inc. is $2.16. The best choice is B.