A company has earnings per share net income of $900,000; its weighted-average ordinary shares outstanding are 180,000. Its dividend per share is $0.45, its market price per share is $88, and its book value per share is $76. Its price-earnings ratio equals:

Question

Quizplus · Accepted Answer

First, we can calculate the company's dividend yield as:
Dividend Yield = Dividend per share / Market price per share
Dividend Yield = 0.45 / 88 = 0.0051

Next, we can calculate the company's earnings per share (EPS) as:
EPS = Net income / Weighted-average ordinary shares outstanding
EPS = 900,000 / 180,000 = 5

With these two values, we can calculate the company's price-earnings (P/E) ratio as:
P/E Ratio = Market price per share / Earnings per share
P/E Ratio = 88 / 5 = 17.6

Therefore, the company's P/E ratio is 17.6.

A Company Has Earnings Per Share Net Income of $900,000;