Company X pays out 100% of its earnings in the form of annual dividends.Last year,the company paid $5.25 in dividends for the year.If the stock price is $105 per share,what is the "trailing" P/E?

Question

Quizplus · Accepted Answer

Since the company pays out 100% of its earnings in the form of dividends, the earnings per share (EPS) is equal to the dividend per share. Therefore, the EPS for the company is $5.25. 
The trailing P/E ratio is calculated by dividing the current stock price by the EPS. So, 
P/E = Stock Price / EPS 
P/E = $105 / $5.25 = 20 
Therefore, the trailing P/E ratio for Company X is 20. The correct choice is D.

Company X Pays Out 100% of Its Earnings in the Form