what will be the price-earnings ratio of the company?

Earnings per share 47k

Dividends per share 30k

Per value of each share N1.20

market price per share NM1.50

 

A. N3.91
B. N3.19
C. N2.95
D. N2.55

Correct Answer:

Option B – N3.19

Explanation

Price-earnings ratio, also known as P/E ratio, is a tool that is used by investors to help decide whether they should buy a stock. Essentially, the P/E ratio tells potential investors how much they have to pay for every $1 of earnings. A low P/E ratio is attractive in the sense that one pays less for every $1 of earnings. At the same time, companies with higher P/E ratios generally expect higher earnings growth in the future than companies with low P/Es. it is gotten as:

Price earnings ratio = market value ÷ Earnings per share (EPS)

= 1.5/47K
= 3.19