try to solve it-3

15:1

Hi.  Thanks for reply.  Actually i want to know the how to arrive at answer.  Please give detailed answer with the formula used.

Thanks in advance

company capitalised its earnings per share at 15% i.e. EPS = Price of share *15% = Rs 12 per share ..therefore Earnings price ratio = EPS / Price of share 8*100  = 15% or .15:1

1.  First you calculated EPS=80*15/100=Rs.12

2. Then, you calculated earning price ratio=EPS/price of share

Here, you put EPS=8

Why ???????????

Value of Share = 80+20 = 100

Capitalisation Rate = 15%
EPS= 100*15/100=15

Price Earning Ratio = 15 : 1

Is it correct. If not what is correct answer

Value of one Share=Earning available to one  Equity Share(EPS)/Capitalisation rate of Equity

Here Value of Share=80+20

and Capitalisation rate is 15%

100=EPS/15%

EPS=100*15%=15

please reply with correct answer, i am right or wrong.

This is the solution but still not able to understand

Earning price ratio = 0.15 [1– 20/80] = 0.15 (1– .25) = .1125 = 11.25%
Earning per share = EPS = 80 × .1125 = Rs. 9.00

value of share = 80 (inclusive of growth value of Rs. 20)

Actual Value of share = 60

Earnings = 60*15/100=9

PER = 9/60 = 15:1