Question

The stock of Beatrice Co. is trading at $38 1/2. The price-earnings ratio is 9 times...

The stock of Beatrice Co. is trading at $38 1/2. The price-earnings ratio is 9 times earnings. Calculate the earnings per share (to the nearest cent) for Beatrice Co.

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Answer #1

Solution:

The formula for calculating the Price earnings Ratio is

P / E Ratio = Market Price per share / Earnings price per share

As per the information given in the question we have

Market Price per share = $ 38 1 / 2 = $ 38.50   ; P/E Ratio = 9

Applying the above values in the formula :

$ 9 = $ 38.50 / Earnings price per share

Thus

Earnings price per share = $ 38.50 / $ 9 = $ 4.2778

= $ 4.3 ( when rounded off to the nearest cent )

Therefore the Earnings per share for Beatrice Co. = $ 4.3

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