Knight Corp.'s stock trades at $60. It has a book value of $15 per share and earnings per share of $3.00. What is the PE ratio for Knight Corp.?

To calculate the price-to-earnings (PE) ratio, you divide the current market price of the stock by the earnings per share (EPS). In this case, Knight Corp.'s stock trades at $60, and its earnings per share is $3.00.

The formula for the PE ratio is:

[ \text{PE Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share}} ]

Substituting the given values:

[ \text{PE Ratio} = \frac{60}{3} = 20 ]

This indicates that investors are willing to pay $20 for every $1 of earnings the company generates. A PE ratio of 20 suggests a higher valuation compared to lower PE ratios, which might indicate that the market expects future growth in earnings.

Understanding this ratio is important for investors as it offers insight into how the market values a company's earnings in relation to its stock price. In this case, the choice reflecting a PE ratio of 20 accurately represents the calculated value from the provided data.