Question

Dearborn Company has earnings per share of $2.80, it paid a dividend of $2.10 per share, and the market price of the company's stock is $61 per share. The price/earnings ratio is closest to:

Answer 1

The price/earnings ratio is closest to 21.79

Step-by-step explanation:

Price / Earning ratio is used to assess the owner`s appraisal of share value. The higher the ratio the more confident that the shareholders have on company's future performance.

Price / Earning ratio = Market price of Share ÷ Earnings per share

= $61 ÷ $2.80

= 21.79