Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.00.

Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.00.
The price-earnings ratio is $________.

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  1. Answer:

    The price-earnings ratio=10

    Explanation:

    Step 1: Determine the price-earnings ratio

    The price-earnings ratio can be expressed as;

    P/E=MV/E

    where;

    P/E=price-earnings ratio

    MV=market price per share

    E=earnings per share

    In our case;

    P/E=unknown

    MV=$20

    E=$2

    replacing;

    P/E=20/2=10

    The price-earnings ratio=10

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