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XI The PE Ratio is Share Price / Fully Diluted Shares Earnings per Share; PE Ratio...

XI

The PE Ratio is Share Price / Fully Diluted Shares Earnings per Share; PE Ratio is also Equity Value / Net Income. X-File Corp has Sales of $200M, EBITDA of $35M, Depreciation and Amortization of $10M, Net Income of $25M, Equity Value of $418M, a Share Price of $35, and there are 5M Fully Diluted Shares, and $2.10 Fully EPS.

1. Compute PE Ratio based on share price.

2. Compute PE Ratio based on Equity Value.

3. Compute PE Ratio based on

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Answer #1

1. Compute PE Ratio based on share price.

Fully Diluted earnings per share = Net Income / Fully Diluted Shares = $25 M / 5 M = $5 per share

PE Ratio based on share price = Share Price / Fully Diluted Shares Earnings per Share

PE Ratio based on share price = 35 / 5

PE Ratio based on share price = 7 times

2. Compute PE Ratio based on Equity Value.

PE Ratio based on Equity Value = Equity Value / Net Income

PE Ratio based on Equity Value = 418 M / 25 M

PE Ratio based on Equity Value = 16.72 Times

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