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Use the following financial data regarding Joy Ride Investments Co.12/31/2021 12/31/2020Net Income   $         30,000,000  $         13,560,000Shares outstanding                 2,100,000                2,100,000Total Assets   $       150,000,000  $       115,500,450Total Liabilities   $         59,000,000  $         62,000,000Total Shareholder Equity   $         71,500,450  $         53,500,450Market Price per Share  $                   16.23  $                   12.74What is the Price to earnings ratio on 12/31/2021?Group of answer choices9.451.1415.6711.00

Question

Use the following financial data regarding Joy Ride Investments Co.12/31/2021 12/31/2020Net Income        30,000,000          30,000,000           13,560,000Shares outstanding                 2,100,000                2,100,000Total Assets         150,000,000        150,000,000         115,500,450Total Liabilities           59,000,000          59,000,000           62,000,000Total Shareholder Equity           71,500,450          71,500,450           53,500,450Market Price per Share                    16.23                    16.23                     12.74What is the Price to earnings ratio on 12/31/2021?Group of answer choices9.451.1415.6711.00

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Solution

The Price to Earnings (P/E) ratio is calculated by dividing the Market Price per Share by the Earnings per Share (EPS).

First, we need to calculate the EPS. The EPS is calculated by dividing the Net Income by the number of Shares Outstanding.

For 12/31/2021:

Net Income = $30,000,000 Shares Outstanding = 2,100,000

So, EPS = Net Income / Shares Outstanding = 30,000,000/2,100,000=30,000,000 / 2,100,000 = 14.29 (approximately)

The Market Price per Share on 12/31/2021 is $16.23.

So, the P/E ratio = Market Price per Share / EPS = 16.23/16.23 / 14.29 = 1.14 (approximately)

So, the Price to Earnings ratio on 12/31/2021 is 1.14.

This problem has been solved

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Use the following financial data regarding Joy Ride Investments Co.12/31/2021 12/31/2020Net Income   $         30,000,000  $         13,560,000Shares outstanding                 2,100,000                2,100,000Total Assets   $       150,000,000  $       115,500,450Total Liabilities   $         59,000,000  $         62,000,000Total Shareholder Equity   $         71,500,450  $         53,500,450Market Price per Share  $                   16.23  $                   12.74What is the return on Equity for year 2021 (hint: Total Equity is not the same at the beginning and end of 2021...)Group of answer choices23.3%27.7%68%41.5%

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