Market Value Ratios Lab R Doors' year-end price on its common stock is $55. The firm...

Market Value Ratios Lab R Doors' year-end price on its common stock is $55. The firm has a profit margin of 11.5%, total assets of $30 million, a total asset turnover ratio of 2.00, no preferred stock, and there are 4.0 million shares of common stock outstanding. What is the PE ratio for Lab R Doors? (Do not round intermediate steps.)

A) 31.884

B) 14.493

C) 0.273

D) 0.546

Expert Solution

A) 31.884

Working:

a.	Sales	=	Assets x Assest turnover ratio
		=	$ 30	x	2
		=	$ 60	Million

b.	Net Income	=	Sales x Profit margin
		=	$ 60	x 11.5%
		=	$ 6.9	Million

c.	Earning per common stock	=	Net Income/ Number of common stock
		=	$ 6.9	/	$ 4.00
		=	1.725

d.	PE Ratio	=	Price per common stock/Earning per common stock
		=	$ 55.00	/	$ 1.725
		=	31.884

jeff jeffy answered 2 years ago

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