Last year, Alfred\'s Automotive had a price-earnings ratio of 15 and earnings pe
ID: 2618301 • Letter: L
Question
Last year, Alfred's Automotive had a price-earnings ratio of 15 and earnings per share of $1.20. This year, the price earnings ratio is 18 and the earnings per share is $1.20. Based on this information, it can be stated with certainty that:
the price per share decreased.
the earnings per share decreased.
investors are paying a lower price per share this year as compared to last year.
investors are receiving a higher rate of return this year.
the investors’ outlook for the firm has improved.
the price per share decreased.
the earnings per share decreased.
investors are paying a lower price per share this year as compared to last year.
investors are receiving a higher rate of return this year.
the investors’ outlook for the firm has improved.
Explanation / Answer
last year, P/E = 15; E = $1.20
So, P/$1.20 = 15
P = $18.0
This year, P/E = 18
Earnings per share = $1.20
P/$1.20 = 18
P=$21.60
So option (D) is the correct answer.
Investors are receiving higher rate of return this year.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.