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Atlas company sells for $32/ share and its latest 12 month earnings are expected to be...

Atlas company sells for $32/ share and its latest 12 month earnings are expected to be $4 per share with dividend payout ratio of 50%. what is atlas' current p/e ratio?

A) Greater than

B) Less than

C) Equal to

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Answer #1

P/E Ratio is also called Price Earnings Ratio. It is used to find whether the companies are over or under valued.

As the name suggests, Price Earnings Ratio = P/ E Ratio = Market Price per share / Earnings per share = MPS / EPS

Given that, MPS = $32

EPS = $4

So, P/E Ratio = MPS / EPS = $32 / $4 =

So, P/E Ratio = 8

Note: Please let me know in comments if I have missed to answer this question, because the options I am still to figure out what the options (a), (b) and (c) mean, in context of this question.

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