A company A with founding share capital = €200,000 has issued 200,000 shares. According to its balance sheet, company A has:

A company A with founding share capital = €200,000 has issued 200,000 shares. According to its balance sheet, company A has:
Equity = €400,000
Profits before Taxes = €200,000
Profits after Taxes = €120,000.
Calculate the following: Nominal Share Price, Book Share Price, Earnings per share, and the ratio P/E.

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Expert Solution

Nominal Share Price = Founding Share Capital/ No. of Shares Issued
Nominal Share Price = € 200,000/ 200,000 shares
Nominal Share Price = € 1

Book Share Price = Total Value of Equity/ Number of Shares Outstanding
Book Share Price = € 400,000/200,000 shares
Book Share Price = € 2

Earning Per Share = Profit After Taxes/ Number of Shares Outstanding
Earning Per Share = € 120,000/200,000 shares
Earning Per Share = € 0.6

PE Ratio = Share Price / Earning Per Share
a) PE Ratio with Nominal Share Price = € 1 / € 0.6 = 1.67
b) PE Ratio with Book Share Price = € 2 / € 0.6 = 3.33

Nabeel answered 1 year ago

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