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The price-earnings ratio

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An investor buys a stock for $40 per share and sells it for $45 after one year. Also, at the end of that year, the dividend per stock is $1. The company has 100,000 shares outstanding and a total profit for the year of $500,000. The price-earnings ratio for this firm at the time the stock was sold is?

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Earnings per share= Total Profit/Shares outstanding
=500000/100000
=$5 per share

P/E ratio= Price /Earnings per ...

Solution Summary

The price-earnings ratio is delivered.

$2.19