Suppose the Martin Microchip Corporation earns a profit of $20 per share of stock.If the prevailing interest rate is 10 percent and the stock is currently selling for $100 per share,what is the current price/earnings ratio?
A)5.
B)0.20.
C)20.
D)10.

Question

Quizplus · Accepted Answer

The price/earnings (P/E) ratio is calculated by dividing the current market price of the stock by its earnings per share (EPS). In this case, the EPS is $20 and the stock price is $100, so the P/E ratio is $100/$20 = 5.

Suppose the Martin Microchip Corporation Earns a Profit of $20