In accounting:
1) EPS - Earnings available to each equity share
Formula of EPS
EPS = Earnings available to shareholders/No of shares
2) No. lower EPS represents lower earnings per share (Lower returns for investment)
3 ) Lower P-E ratio is better.
P.E ratio = Market price/EPS
P-E means how many times share price trading in market compared to
EPS
Lower P-E gives more return
4) Lower P-E gives more return on investment
Example: Case -1: EPS = $2, P-E ratio = 10
times, MPS = $2*10 = $20
In this case investor get $2 return for $20 investment (10%
return on investment)
Case -2: EPS = $2, P-E ratio = 5
times, MPS = $2*10 = $10
In this case investor get $2 return for $10 investment (20%
return on investment)
In case 2 investor will get 20% return when PE is only 5 times
compared to 10% return when PE is 5 times
Therefore when PE ratio is low return will be
high
In accounting: What is earnings per share (EPS)? What does it measure? Is it better to...
Company A is expected by analysts to generate Earnings Per Share (EPS) in 2020 of $4.10. Company A's stock price is $50 per share. Company B is expected by analysts to generate Earnings Per Share (EPS) in 2020 of $1.25. Company B's stock price is $75 per share. *Calculate the Price-to-Earnings (P/E) ratio based on 2020 estimated earnings for Company A and Company B. *Why in general might Company B's P/E multiple be higher than Company A's? *If you knew...
Exercise 13-16 Earnings per share LO A1 Ecker Company reports $1,275,000 of net income and declares $178,500 of cash dividends on its preferred stock for the year. At year- end, the company had 290,000 weighted average shares of common stock 1. What amount of net income is available to common stockholders? Net income To preferred stockholders Net income available to common stockholders $ 2. What is the company's basic EPS? < Prev 3 of 8 Next > your search 199....
PRICE/EARNINGS RATIO A company has an EPS of $3.30, a book value per share of $30.69, and a market/book ratio of 3.7x. what is its P/E ratio? The stock price should be rounded to the nearest cent. Round your answer to two decimal places.
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2) (4 pts) You estimate that Company X will have earnings per share (EPS) of $4.00 next year (end of 2020) and EPS of $4.80 in 2 years (2021). You also estimate that Company X will sell at a P/E multiple of 23 in two years. The dividend payout ratio is expected to be 40%. a) What is your estimation of the intrinsic value of Company X if your required rate of return is 8.0% 2020 2021 Dividends Selling Price...
just need part d please show equations
Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a price of $40. You are thinking of buying TargetCo, which has earnings per share of $2,1 million shares outstanding, and a price per share of $25. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. a. If you pay no premium to buy TargetCo, what will...
Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a price of $40. You are thinking of buying TargetCo, which has earnings per share of $2,1 million shares outstanding, and a price per share of $25. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. a. If you pay no premium to buy TargetCo, what will be your earnings per share after the...
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.
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Question 9(10 points). Martin Manufacturing has earnings per share (EPS) of $3.00, 5 million shares outstanding, and a share price of $32. Martin is considering buying Luther Industries, which has earnings per share of $2.50, 2 million shares outstanding, and a share price of $20. Martin will pay for Luther by issuing new shares. There are no expected synergies from the transaction. a)lf Martin pays no premium to acquire Luther, what will the carnings per share be after the merger?...