Use the following information to answer this question.

Windswept, Incorporated

2022 Income Statement

Net sales

$ 10,050

Cost of goods sold

7,950

Depreciation

370

Earnings before interest and taxes

$ 1,730

Interest paid

100

Taxable income

$ 1,630

Taxes

489

Net income

$ 1,141

Windswept, Incorporated, has 550  shares of stock outstanding. Its price-earnings ratio for 2022 is 12. What is the market price per share of stock?

Question 10 options:

$20.75

$24.89

$14.18

$19.64

$37.75

To calculate the market price per share of Windswept, Incorporated's stock, we use the following formula:

\[
\text{Price per Share} = \text{Earnings per Share} \times \text{Price-Earnings Ratio}
\]

### Step 1: Calculate Earnings Per Share (EPS)
Earnings per Share (EPS) is calculated by dividing the net income by the total number of shares outstanding:

\[
\text{EPS} = \frac{\text{Net Income}}{\text{Shares Outstanding}} = \frac{1,141}{550} = 2.075
\]

### Step 2: Calculate Market Price per Share
Now, we use the price-earnings ratio (P/E ratio) given as 12:

\[
\text{Price per Share} = \text{EPS} \times \text{P/E Ratio} = 2.075 \times 12 = 24.9
\]

Thus, the market price per share is approximately **$24.89**.

The correct answer is:

\[
\boxed{24.89}
\]

Would you like further clarification or additional details?

### Related Questions:
1. How is the price-earnings ratio useful in stock valuation?
2. What factors could cause the P/E ratio to increase or decrease?
3. How does market price per share affect a company's market capitalization?
4. Can a company have a negative EPS, and if so, what does it mean for its stock?
5. What are other valuation methods aside from the P/E ratio?

**Tip:** The price-earnings ratio is a key indicator of market expectations for a company’s growth.

Windswept, Incorporated, has 550 shares of stock outstanding. Its price-earnings ratio for 2022 is 12. What is the market price per share of stock?

Learn how to calculate the market price per share for Windswept, Incorporated using the price-earnings ratio and earnings per share (EPS). This stock valuation problem involves basic algebraic concepts and is suitable for high school students (Grades 10-12).

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation