The stock price in 1 year, if price/earnings ratio remains at its current level. Earnings per Share (EPS): Earnings per share, is the ratio of profit after tax and number of outstanding equity share. It is the amount earned by each equity shares of the company. Earnings per share determine the profitability of the firm in terms of equity shares. Price Earnings Ratio (P/E Ratio): The ratio of the earnings per share and market price of a share is called price earnings ratio. This ratio indicates that to earn one rupee, how much money an investor need to invest in that particular share.

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Chapter 4, Problem 21P

Summary Introduction

To determine: The stock price in 1 year, if price/earnings ratio remains at its current level.

Earnings per Share (EPS):

Earnings per share, is the ratio of profit after tax and number of outstanding equity share. It is the amount earned by each equity shares of the company. Earnings per share determine the profitability of the firm in terms of equity shares.

Price Earnings Ratio (P/E Ratio):

The ratio of the earnings per share and market price of a share is called price earnings ratio. This ratio indicates that to earn one rupee, how much money an investor need to invest in that particular share.

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