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3 May, 03:24

ABC Corp. has a market price of $15 and a Price/Earnings multiple of 10. What was the corporation's Earnings Per Common Share?

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  1. 3 May, 03:50
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    The correct answer is: $1,5.

    Explanation:

    The Price-to-Earnings ratio or P/E ratio is the relationship between a company's market value of per-share common stock and its earning per share. It is obtained by dividing the two factors previously mentioned and the result is the P/E ratio which is also called the multiple.

    Thus, in the example:

    P/E ratio = (market value per share) / (earning per share)

    We can deduct:

    Earnings per share = (market value per share) / P/E ratio

    Then:

    Earnings per share = $15/10

    Earnings per share = $1,5
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