Question

A company has an EPS of $2.10, a book value per share of $20.58, and a market/book ratio of 3.4x. What is its P/E ratio? The stock price should be rounded to the nearest cent. Round your answer to two decimal places.

x

A firm has a profit margin of 6% and an equity multiplier of 1.9. Its sales are $280 million, and it has total assets of $84 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal places.

%

Answer 1

1)
P/E ratio is	33.32
Working:
Step-1:Calculation of market price per share
Market Price per share			=	Book Value per share * Market/Book ratio
			=	$    20.58	*	3.4
			=	$    69.97
Step-2:Calculation of P/E ratio
	P/E ratio		=	Market Price per share/EPS
			=	$    69.97	/	$       2.10
			=	33.32
2)
ROE is	10.53%
Working:
Step-1:Calculation of net income
	Net Income		=	Sales * profit margin
			=	280*6%
			=	$    16.80	Million
Step-2:Calculation of stockholder's equity
	Stockholder's Equity		=	Total assets * Equity multiplier
			=	84*1.9
			=	$ 159.60	Million
Step-3:Calculation of return on equity
	Return on Equity		=	Net Income / Stockholder's Equity
			=	$    16.80	/	$ 159.60
			=	10.53%