NISM Certifications · NISM-Series-XV: Research Analyst · Valuation Principles
A company has a share price of Rs 240, earnings per share of Rs 16, book value per share of Rs 120 and an expected dividend of Rs 8 per share. Which of the following is the correct trailing P/E ratio and P/B ratio respectively?
The P/E ratio is 15 and the P/B ratio is 2. P/E is price divided by earnings per share, 240 divided by 16, and P/B is price divided by book value per share, 240 divided by 120.
- A15 and 2Correct
- B30 and 2
- C15 and 0.5
- D30 and 0.5
Explanation
P/E = 240/16 = 15. P/B = 240/120 = 2. Checking back: 15 x 16 = 240 and 2 x 120 = 240. Options with 30 use the dividend (240/8) instead of EPS, and 0.5 inverts the P/B ratio.
Did you get it right without looking?
One question tells you little. A timed set on Valuation Principles shows your real accuracy, how long you take and where you lose marks.
More Valuation Principles questions
- A company expects next year's dividend of Rs 6 per share. Its cost of equity is 14% and dividends are expected to grow at 8% forever. What i…
- A company has expected dividend next year of Rs 12 per share, a constant growth rate of 6% forever and a required return of 14%. What is the…
- A stock is expected to pay dividends of Rs 10 at end of year 1 and Rs 11 at end of year 2. At the end of year 2 the share is expected to be …
- In a two-stage dividend discount model, which of the following is the correct treatment of the terminal value at the end of the high-growth …
- A company's equity shares trade at Rs 600. Its earnings per share for the latest year are Rs 40. What is its trailing price-to-earnings mult…
- A company has a share price of Rs 240, earnings per share of Rs 16 and a book value per share of Rs 80. Its dividend payout ratio is 25%. Wh…