Answer:
a. 6.9
Explanation:
[tex]\frac{Market \: Price}{EPS} = $Price-Earnings Ratio[/tex]
55/8 = 6.875 = 6.9
This means purchase a share of this company is paying 6.9 times his annual earnings.
It could be interpreted both ways:
- if this is high, the market can expect to grow their earnings soon or...the share is overstated and will not increase his value shortly.
- If this is considered low, then the market expects its earnings to decrease or ... the share is understated and will increase their valuation soon
