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PRICE/EARNINGS RATIO A company has an EPS of $1.50, a book value per share of $14.55,...

PRICE/EARNINGS RATIO

A company has an EPS of $1.50, a book value per share of $14.55, and a market/book ratio of 1.4x. What is its P/E ratio? The stock price should be rounded to the nearest cent. Round your answer to two decimal places.


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Answer #1
Step-1:Calculation of market value per share
Market Value per share = Book Value per share * market /book ratio
= $    14.55 * 1.4
= $    20.37
Step-2:Calculation of Price/Earning Ratio
Price/Earning Ratio = Market Price Per share / EPS
= $    20.37 / $       1.50
= 13.58
Thus, P/E ratio is 13.58x
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