If the P/E Ratio of a Company's Common Stock Were

Multiple Choice

If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

A) the market value of the common stock would be $20.83 per share.
B) the market value of the common stock would be $25.00 per share.
C) an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.
D) an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share.