if there is $48,000 in earnings available to common stock holders and the firm’s stock has a P/E of 20 times earnings per share, what is the current price of the stock?
To find the current price of the stock, you need to divide the earnings available to common stockholders by the P/E ratio.
First, calculate the earnings per share (EPS) by dividing the earnings available to common stockholders by the total number of outstanding shares.
Next, you can determine the current price of the stock by multiplying the EPS by the P/E ratio.
Let's calculate step by step:
Step 1: Calculate the earnings per share (EPS):
EPS = Earnings available to common stockholders / Number of outstanding shares
Step 2: Calculate the current price of the stock:
Current Price of the Stock = EPS * P/E Ratio
Given:
Earnings available to common stockholders = $48,000
P/E ratio = 20 times earnings per share
Step 1: Calculate EPS:
If the number of outstanding shares is not provided, we cannot calculate the EPS.