The following selected information relates to Belcher Unlimited for the past two years. The price-earnings ratio for the current year is
A)47.00.
B)7)25.
C)9)28.
D)2)47.

Question

The following selected information relates to Belcher Unlimited for the past two years.  The price-earnings ratio for the current year is
A)47.00. 
B)7)25. 
C)9)28. 
D)2)47.

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the current market price per share by the earnings per share.

For 2018:
Market price per share = $48
Earnings per share = $1.8
P/E ratio = 48/1.8 = 26.67

For 2019:
Market price per share = $60
Earnings per share = $2.05
P/E ratio = 60/2.05 = 29.27

Taking the average of the two P/E ratios, we get:
(26.67 + 29.27)/2 = 27.97

Rounding off to the nearest multiple of 0.5, we get the answer as 28, which corresponds to option C (9)28).

The Following Selected Information Relates to Belcher Unlimited for the Past