Question

Reno Revolvers has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?

Answer 1

Answer:

16

Explanation:

The formula to compute the price earning ratio is shown below:

Price-earnings ratio = (Market price per share) ÷ (Earning per share)

where,

Earning per share is $1.50

And, the market price per share is

= Cash flow per share × price/cash flow ratio

= $3 × 8

= $24

Now placing this value to the formula above

So, the price earning ratio is

= $24 ÷ $1.50

= 16