Question

Jupiter Explorers has $8,200 in sales. The profit margin is 5 percent. There are 5,200 shares of stock outstanding. The market price per share is $1.70. What is the price-earnings ratio?

a.10.78
b.21.56
c.37.10
d.14.45
e.13.40

Answer 1

To find the price-earnings ratio, first calculate the company's total profit using the sales figures and profit margin. Then, determine the EPS by dividing the profit by the number of shares. Finally, divide the market price per share by EPS to find the P/E ratio, which is 21.56 in this case.

Step-by-step explanation:

The question is asking how to calculate the price-earnings ratio for a company with the given financial data. To find the price-earnings ratio, we first need to calculate the total profit by using the profit margin and the company's sales figures. Then, we divide the total profit by the number of shares outstanding to find the earnings per share (EPS). Finally, we divide the market price per share by the EPS to get the price-earnings ratio.

Here is the step-by-step calculation:

• Total Profit = Sales × Profit Margin = $8,200 × 0.05 = $410
• Earnings Per Share (EPS) = Total Profit / Number of Shares Outstanding = $410 / 5,200 = $0.078846 per share
• Price-Earnings Ratio (P/E Ratio) = Market Price Per Share / EPS = $1.70 / $0.078846 ≈ 21.56

Therefore, the correct answer is b. 21.56.