XYZ's Price/Earnings Ratio Calculation

XYZ's Price/Earnings Ratio Calculation

XYZ has a current market price of $30, earnings of $2.5, beta of 1.1, and dividend of $1.25. We need to calculate the Price/Earnings ratio.

a) 12
b) 15
c) 11.5
d) 10.8

Final answer:

The correct option is a) 12

The Price/Earnings ratio of XYZ is calculated by dividing the market price per share ($30) by the earnings per share ($2.5), resulting in a P/E ratio of 12.

Explanation:

To calculate the Price/Earnings ratio (P/E ratio), you divide the market price per share by the earnings per share (EPS).

In the case of XYZ, with a current market price of $30 and earnings of $2.5 per share, the P/E ratio is calculated as follows:

P/E ratio = Market Price per Share / Earnings per Share
P/E ratio = $30 / $2.5
P/E ratio = 12

Therefore, the correct answer for the P/E ratio of XYZ is a) 12.