Pink Limited Purple Limited Earnings before interest and tax R3 000 000 R4 000 000 Long term interest bearing debt R500 000 R800 000 Earnings attributable to shareholders R2 124 000 R2 822 400 Tax rate 28% 28% Share Capital R2 00 000 R5 000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R30 R20.00 Dividend per share R5 R3 Q.3.3 Calculate the price earnings ratio for Purple Limited.
Pink Limited Purple Limited Earnings before interest and tax R3 000 000 R4 000 000 Long term interest bearing debt R500 000 R800 000 Earnings attributable to shareholders R2 124 000 R2 822 400 Tax rate 28% 28% Share Capital R2 00 000 R5 000 000 Number of ordinary shares issued 200 000 400 000 Number of ordinary shares authorised 1 000 000 500 000 Current market price of the share R30 R20.00 Dividend per share R5 R3 Q.3.3 Calculate the price earnings ratio for Purple Limited.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 17E
Related questions
Question
Pink Limited |
Purple Limited |
|
Earnings before interest and tax |
R3 000 000 |
R4 000 000 |
Long term interest bearing debt |
R500 000 |
R800 000 |
Earnings attributable to shareholders |
R2 124 000 |
R2 822 400 |
Tax rate |
28% |
28% |
Share Capital |
R2 00 000 |
R5 000 000 |
Number of ordinary shares issued |
200 000 |
400 000 |
Number of ordinary shares authorised |
1 000 000 |
500 000 |
Current market price of the share |
R30 |
R20.00 |
Dividend per share |
R5 |
R3 |
Q.3.3 |
Calculate the price earnings ratio for Purple Limited. |
|
Expert Solution
Step 1
Price to earnings ratio is the ratio that helps in determining the value of company and also to identify whether they are overvalued and undervalued.
Step 2
Formula used:
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