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16 July, 03:38

Firm A has earnings-per-share of $3.00. Firm B has earnings-per-share of $2 and a price-per-share of $30. Using the Price/Earnings (P/E) ratio of firm B as a benchmark, what should be the price-per-share of firm A?

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  1. 16 July, 06:44
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    Company A's price per share is $45

    Explanation:

    The P/E ratio of one company can be used by investors and analysts to determine the value of another companie's stock in the industry. This is called apples-to-apples comparism.

    The P/E ratio is used to value a company by comparing its share price to earnings per share.

    P/E ratio = market value of shares / earnings per share

    For company B

    P/E ratio = 30/2 = $15

    Using company B's P/E ratio as a benchmark for company A

    15 = Price per share / 3

    Price per share = 15*3 = $45
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Home » Business » Firm A has earnings-per-share of $3.00. Firm B has earnings-per-share of $2 and a price-per-share of $30. Using the Price/Earnings (P/E) ratio of firm B as a benchmark, what should be the price-per-share of firm A?
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