Question

    Calculate P/E Ratio from the following: Equity

    share capital @ 10 each : 800000 9% preference share capital: 300000   Profit (after 35% tax) : 267000   Depreciation: 67000 Market Price of Equity: 48
    A 15 times Correct Answer Incorrect Answer
    B 16 times Correct Answer Incorrect Answer
    C 17 times Correct Answer Incorrect Answer
    D 18 times Correct Answer Incorrect Answer
    E 20 times Correct Answer Incorrect Answer

    Solution

    Earning Per Share = Profit after tax and dividend/Number of equity shares outstanding = (267000- 27000)/ 80000 = 3 P/E Ratio = Price per share / EPS = 48/3 = 16

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