Over the last 5 years, Spencer Inc.'s earnings have grown at an annual average rate of 9%.Current EPS are $1.80 and the company's stock recently sold for $36 per share.Spencer's PEG ratio is

Question

Quizplus · Accepted Answer

PEG ratio (price/earnings-to-growth ratio) is calculated by dividing the P/E ratio by the earnings growth rate. 
P/E ratio = Price per share / Earnings per share
Using the given information: 
P/E ratio = $36 / $1.80 = 20
Earnings growth rate = 9%
PEG ratio = P/E ratio / earnings growth rate = 20 / 9% = 2.22
Therefore, the best choice is C.

Over the Last 5 Years, Spencer Inc