The market price of friden company's common stock increased from $15 to $18. earnings per share of common stock remained unchanged. what would happen to the company's price-earnings ratio? a. remain unchanged b. impossible to determine. c. increase d. decrease

Option (C) is correct.

Explanation:

Given that,

Old market price of stock = $15

New market price of stock = $18

Here, we assume that EPS be $5.

So,

Price-earning ratio at old price =

                                                   =  

                                                   = 3

Price-earning ratio at New price =

                                                   =  

                                                   = 3.6

Hence, price-earnings ratio increases.

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