Question

A firm has a reported enterprise value of $42.00 billion. The firm has $12.00 billion of debt on its balance sheet, and $1.00 billion in cash. The firm also reports $6.00 billion in shareholder equity with 500.00 million shares outstanding. Finally, the firm reported $773.00 million in net income last year.

What is the P/E ratio for the firm?

Answer 1

Answer:

PE Ratio  = 40.10

Explanation:

given data

enterprise value = $42.00 billion

debt = $12.00 billion

cash = $1.00 billion

shareholder equity = $6.00 billion

Shares outstanding = 500.00 million

net income = $773.00 million

solution

we get here Market Value of Equity that is express as

Market Value of Equity = Enterprise Value - Debt + Cash   ................1

Market Value of Equity = $42 - $12 + $1

Market Value of Equity =  $31 billion  

and now we get Price per Share

Price per Share  =  $\frac{price\ per\ share}{share\ outstanding}$    .............2

Price per Share  = $\frac{31}{0.5}$  

Price per Share  = $62  

and

Earnings per Share will be here as

Earnings per Share = $\frac{net\ income}{share\ outstanding}$    ..................3

Earnings per Share = $\frac{773}{500}$

Earnings per Share = 1.546

so PE Ratio  will be

PE Ratio  = $\frac{62}{1.546}$

so here PE Ratio  = 40.10