Suppose You Own Stock in National Advertising Which Had Earnings

question 145

Multiple Choice

Suppose you own stock in National Advertising which had earnings of $2.50 per share last year. If yesterday's closing price was $41.50, what is the price-earnings ratio of the stock? (Round to the nearest whole number)

• A) 6:1
• B) 1:17
• C) 4:1
• D) 17:1

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Definitions:

Net Present Values

The gap between the present value of cash entering and the present value of cash exiting over a certain period, used within capital budgeting to gauge the financial viability of an investment.

Payback Period

The duration it takes for an investment to generate enough cash flow to recover its initial cost.

Average Accounting Returns

A financial ratio that measures a firm's average profitability relative to its investment, typically calculated as net income divided by average book value of investment.

Project

A systematically planned group of tasks that are interdependent, meant to be executed within a fixed timeframe whilst respecting certain financial and additional limits.