AirPure Services has sales of $2,500,000 and profit margin of 20%. The company has 250,000 shares...

AirPure Services has sales of $2,500,000 and profit margin of 20%. The company has 250,000 shares outstanding. What is the price-earnings ratio if the stock has a book value of $19.20 per share and stock price of $43.20?

Expert Solution

Net profit = Sales * Profit margin = 2500000 * 20%

= 500000

Earning per share = Net profit / Number of shares

= 500000 / 250000

= 2.00

Price earning ratio = Market price / EPS

= 43.20 / 2.00

= 21.60 times

jeff jeffy answered 2 years ago

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