Question : A company's net income after preference dividend payment was Rs.63 lakh. There were 1,80,000 equity shares. The company's P/E ratio was 8.50 times. What are the earnings per share and market value per share?
Option 1: Rs.45 & Rs.382.50 respectively
Option 2: Rs.35 & Rs.297.50 respectively
Option 3: Rs.33.16 & Rs.281.86 respectively
Option 4: Rs.45 & Rs.5.29 respectively
Correct Answer: Rs.35 & Rs.297.50 respectively
Solution : EPS = 63,00,000/ 1,80,000 = 35 Market Price = P/E Ratio × EPS = 8.5 × 35 = 297.5 Hence option 2 is the correct answer.
Question : 9% preference shares of 10 each Rs. 5,00,000, Equity shares of 10 each Rs.1,20,000, Profit after tax Rs.4,20,000, Equity dividend paid 20%, Market price of equity shares Rs.25 each. What will be the earnings per share?
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