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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