What is the firm’s P/E ratio?
I need help with this Question..
The stocks of Horizon Company sell for $50 per share. The firm has a dividend yield of 4% and a payout ratio of 40%. What is the firm’s P/E ratio? Idk how to do this one
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If the dividend payout ratio is 40%, then the net earnings are 10% of the price and the P/E ratio is 10.
As said, the dividend per share is $50 x 4%=$2
$2 is 40% of the Earnings, therefore the Earnings are 2/40 x 100=$5
P/E is Price/Earnings Per Share or $50/$5=10
You should be working out these simple exercises yourself!