Discount Mart has $876,400 in sales with a profit margin of 3.8 percent.There are 32,500 shares of stock outstanding at a market price per share of $21.60.What is the price-earnings ratio?

Question

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To find the price-earnings ratio, first calculate the net income by multiplying sales by the profit margin: $876,400 * 0.038 = $33,303.20. Then, find the earnings per share (EPS) by dividing the net income by the number of shares: $33,303.20 / 32,500 = $1.0247. Finally, calculate the price-earnings ratio by dividing the market price per share by the EPS: $21.60 / $1.0247 ≈ 21.08.

Discount Mart Has $876,400 in Sales with a Profit Margin