How long would it take to break even if a common stock worth $20 has an EPS of $1 per share?

To determine how long it would take to break even on a common stock investment based on its share price and earnings per share (EPS), you can use the following calculation:

The break-even point occurs when the total return on the investment equals the initial investment. In this case, the stock is valued at $20 per share, and it generates an EPS of $1 per share annually.

To calculate the number of years it would take to recover the initial investment through earnings, simply divide the share price by the EPS. Here, this calculation would be:

Break-even years = Price per share / EPS
Break-even years = $20 / $1 = 20 years

Therefore, it will take 20 years for an investor to break even on their investment in this particular stock when considering only the earnings generated per share. This reflects the time it would take to accumulate enough earnings to equal the initial price paid for the stock, making 20 years the correct answer.