HomeworkLib
Question

1. The target stock price for Babies Inc. is $25.00, with a benchmark price earnings ratio...

1. The target stock price for Babies Inc. is $25.00, with a benchmark price earnings ratio (P/E) of 10. What would be its earnings per share? (show work)

  1. $250 per share
  2. $25 per share
  3. $2.50 per share
  4. $0.40 per share
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Explanation:

Price earnings ratio = share price/ Earnings per share

Given , Price earnings ratio =10

Share price =$25

Therefore, 10=$25/EPS

EPS =$25/10

EPS =$2.50

So the answer is Option C. i.e $2.5 per share

_____×_____

All the best

Please do rate

0 0
Add a comment
Know the answer?
Add Answer to:
1. The target stock price for Babies Inc. is $25.00, with a benchmark price earnings ratio...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A firm with earnings per share of $8 and a price-earnings ratio of 10 will have...

    A firm with earnings per share of $8 and a price-earnings ratio of 10 will have a stock price of O $80.00 O $18.00 O $6.00 the market assigns a stock price independent of EPS and the P/E ratio.

  • Bluechips Inc. generates a rate of return of 18 percent on its investments and maintains a...

    Bluechips Inc. generates a rate of return of 18 percent on its investments and maintains a retention ratio of 0.40. Its earnings this year will be $3 per share. The required rate of return is 14 percent. a) Find the price and P/E ratio of the firm. b) What happens to the P/E ratio if the retention ratio is increased to 0.55? Why? c) Show that if the retention ratio equals zero, the earnings-price ratio, E/P, falls to the expected...

  • P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $7.80 and...

    P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $7.80 and a P/E ratio of 15.38. What is the stock price? Multiple Choice $46.36 $.51 $1.97 $119.96

  • Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...

    Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $25 par value (no change during the year) $3,750,000 Preferred $8 stock, $100 par (no change during the year) 2,000,000 The net income was $520,000 and the declared dividends on the common stock were $37,500 for the current year. The market price of the common stock is $16.80 per share. For...

  • The following information is available for Jase Company: Market price per share of common stock $25.00...

    The following information is available for Jase Company: Market price per share of common stock $25.00 Earnings per share on common stock $2.00 Which of the following statements is correct? A. The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. B. The price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of...

  • Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...

    Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $10 par value (no change during the year) Preferred $10 stock, $100 par (no change during the year) The net income was $1,206,000 and...

  • The price earnings (P/E) ratio is 5. The earnings per share over the last twelve months...

    The price earnings (P/E) ratio is 5. The earnings per share over the last twelve months is $5.20. Common stock has a par value of $1 per share and was issued at $9 per share. What is the current market price of the stock? Select one: a. $46.80 b. $45.00 c. $5.00 d. $26.00

  • You are currently thinking about investing in a stock valued at $25.00 per share. The stock...

    You are currently thinking about investing in a stock valued at $25.00 per share. The stock recently paid a dividend of $2.25 and its dividend is expected to grow at a rate of 5 percent for the foreseeable future. You normally require a return of 14 percent on stocks of similar risk. What is the stock worth? Is the stock overpriced, underpriced, or correctly priced? $25, it is underpriced $26.25 it is overpriced $26.25 it is underpriced $25 it is...

  • Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...

    Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $25 par value (no change during the year) $7,500,000 Preferred $5 stock, $100 par (no change during the year) 4,000,000 The net income was $1,040,000 and the declared dividends on the common stock were $75,000 for the current year. The market price of the common stock is $21.00 per share. For...

  • High End Costume is all-equity financed and its stock has a price to earnings ratio of...

    High End Costume is all-equity financed and its stock has a price to earnings ratio of 15. The company is considering a capital restructuring by substituting a third of the common stock with an equal value of debt. The debt is issued at a risk-free return of 6%. Assuming that the operating profit remains constant, calculate the following: 1) the percentage increase in earnings per share following the restructuring 2) the new P/E ratio

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT