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    EPS and P/E of a company

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    If a company had 1,000,000 shares outstanding, earnings of $15,000,000 and a stock price of $18 a share, what would its P/E ratio be. How would its EPS and P/E ratio compare to competitor's EPS and P/E/ and would you consider their stock to be undervalued. Why and Why not?

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    EPS = Earnings / no of shares outstanding = 15000000/1000000=$15 per share
    P/E = P/EPS = $18/$15 = 1.20

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    Solution Summary

    EPS and P/E of a company are emphasized.