Homework Answers
Answer: Option c is correct.
Given that the current value of earnings per share(EPS) is
$4.36, and the current value of price to earnings (PE) ratio is
12.32
So, the current share price=EPS*PE=4.36*12.32=$53.7152
When the PE ratio increases to 15 and the EPS increases to $6,
the share price will become:
New share price=(New value of EPS)*(New value of PE)=15*6=90
Percentage increase in the stock price=(Final value-Initial
value)/Initial value
=(90-53.7152)/53.7152
=36.2848/53.7152
=0.675503396 or 67.55% (Rounded to two decimal places)
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