Question

recall that the pe ratio is the ratio of the price per share to the earnings per share, including earnings from the past 4 quarters. compute the pe ratios of the following companies
(a) the share price is $12.44 and the earnings per share is $0.66.
(b) the share price is $35.12, there are 1.4 billion shares, and the company made $5.25 billion in profit over the past 12 months.
(c) the share price is $450.24, and over each of the past 4 quarters, the company made $2.15, $1.61, $1.75, and $2.21 in earnings per share
(a) the pe ratio is approximately
(simplify your answer. round to one decimal place as needed.)

Explanation:

Step1: Recall PE ratio formula

The PE ratio is calculated as the price per share (\(P\)) divided by the earnings per share (\(EPS\)), i.e., \(PE=\frac{P}{EPS}\).

Step2: Substitute values

Given \(P = \$12.44\) and \(EPS=\$0.66\), we substitute into the formula: \(PE=\frac{12.44}{0.66}\).

Step3: Calculate the division

\(\frac{12.44}{0.66}\approx18.848\). Rounding to one decimal place, we get \(18.8\).

Answer:

18.8