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 18.8
(simplify your answer round to one decimal place as needed )
(b) the pe ratio is approximately 9.4
(simplify your answer round to one decimal place as needed )
(c) the pe ratio is approximately
(simplify your answer round to one decimal place as needed )

Explanation:

Step1: Calculate total earnings per share for 4 quarters

The earnings per share for each quarter are $2.15, $1.61, $1.75, and $2.21. To find the total earnings per share (EPS) for the past 4 quarters, we sum these values:
$$2.15 + 1.61 + 1.75 + 2.21 = 7.72$$

Step2: Calculate PE ratio

The PE ratio is the ratio of the price per share (P) to the earnings per share (EPS). The share price (P) is $450.24, and the EPS (from Step 1) is $7.72. So we calculate the PE ratio as:
$$\frac{450.24}{7.72} \approx 58.3$$

Answer:

58.3