MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2017 and 2016. MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2017 and 2016 respectively. The company paid cash dividends per share of $0.85 in 2017 and $0.63 in 2016. Total stockholders' equity was $13,572 million and $11,896 million in 2017 and 2016 respectively. The common shares outstanding were approximately 1,782,000 in both 2017 and 2016. MusicPod's price/earnings ratio for 2017 is closest to:

Question

Quizplus · Accepted Answer

- Earnings per share (EPS) for 2017 = $2.47
- Closing stock price for 2017 = $53.00
- Dividends paid per share in 2017 = $0.85
- Using the formula for price/earnings (P/E) ratio: P/E = stock price/EPS - dividends
- P/E ratio for 2017 = $53.00/$2.47 - $0.85 = 21.5
- Therefore, the closest answer choice is A) 21.5.

MusicPod's Earnings Per Share Ratios Were $2