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26 January, 20:43

BC Corporation has 1,800 shares outstanding and earned $2,700 last year on assets of $2 million and equity of $1.5 million. What is the PE ratio if the stock is currently selling at $18 per share?

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  1. 26 January, 20:51
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    PE ratio = 12

    Explanation:

    Data provided in the question:

    Number of shares outstanding = 1,800

    Earning on assets = $2,700

    Now,

    Earnings per share, EPS = [ Net income ] : [ shares outstanding ]

    = [ 2,700] : [ 1,800 ]

    = 1.5

    Thus,

    PE ratio = [ Price per share] : [ Earnings per share]

    = 18 : 1.5

    = 12

    Hence,

    PE ratio = 12
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