The following figures are provided to you for ABC Ltd. : Net Profit before Tax = ₹ 17,50,000 The company has 1,00,000 no. of equity shares of face value ₹ 10 fully paid up. The current market price of the equity shares i

CS Professional · Financial, Treasury and Forex Management · PYQS · December 2017
The following figures are provided to you for ABC Ltd. : Net Profit before Tax = ₹ 17,50,000 The company has 1,00,000 no. of equity shares of face value ₹ 10 fully paid up. The current market price of the equity shares is ₹ 85 per share. The Income Tax @ 30% apply to company. What will be that P/E ratio for the company ?

Answer & Explanation:

Calculation of P/E Ratio (₹) Net profit before tax 17,50,000 Less: Tax @ 30% 5,25,000 Net Profit after tax 12,25,000 EPS = Net profit after taxes/ no. of equity share = 12,25,000/1,00,000 = ₹ 12.25 Market price of share (MPS) = ₹ 85 P/E Ratio = market price per share/ earnings per share = ₹ 85/₹ 12.25 = 6.94

Topics: Equity Valuation

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