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ust paid total dividends of $725,000 and reported additions to retained earnings of $2,175,000. The company has 575,000 shares of stock outstanding and a benchmark PE of 15.9 times. What stock price would you consider appropriate

Respuesta :

Answer:

$80.136

Explanation:

The formula to compute the price-earning ratio is shown below:

Price-earnings ratio = (Market price per share) ÷ (Earning per share)

where,

Price earning ratio is 15.9 times

And, the earning per share would be

= (Dividend +  additions to retained earnings ) ÷ (Number of shares outstanding)

= ($725,000 + $2,175,000) ÷ (575,000 shares)

= $5.04

Now put these values to the above formula  

So, the price would equal to

= 15.9 times × $5.04

= $80.136

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