Detailed Answer
Answer (B) is correct. The price-earnings ratio is expressed as the market price per share divided by the earnings per share. However, this can also be expressed as the total market price over the total earnings. Earnings (net income) are equal to $200,000, and the price-earnings ratio is equal to 20. Therefore, the market value can be solved for as follows: 20 = Market value ÷ $200,000 Market value = 20 × $200,000 = 4,000,000