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:

Question

Izabella Henry

Business

30 July, 11:47

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:

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Answers (1)

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Trey Gibbs · Answer 1

Investors' outlook for the firm has improved.

Explanation:

Computation of Market price.

MPS = PE ratio * EPS

⇒ MPS (Previous) = $1.20 * 15

⇒ MPS (Previous) = $18

⇒ MPS (Current) = $1.20 * 18

⇒ MPS (Current) = $21.60

So, we say that the market price has increased.

Investors' outlook for the firm has improved.