Napoli Industries had net income for the year 2016 of $650,000.Napoli had an average number of shares outstanding at the end of the year of 500,000 shares.The market price of Napoli's stock on January 1,2016 was $20 per share.On December 31,2016,the market price was $22 per share.The price-earnings ratio for Napoli at year end is closest to:

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated as the market price per share divided by the earnings per share (EPS). EPS is calculated as net income divided by the average number of shares outstanding. For Napoli, EPS = $650,000 / 500,000 = $1.30. The market price at year-end is $22. Therefore, the P/E ratio = $22 / $1.30 = 16.9.

Napoli Industries Had Net Income for the Year 2016 of $650,000.Napoli