Question

Richards Corporation had net income of $165,425 and paid dividends to common stockholders of $47,000. It had 50,900 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $54 per share. The price earnings ratio a. 125 b. 100 c 23.00 d. 1667

Answer 1

The price earnings ratio for Richards Corporation, given a net income of $165,425 and dividends paid of $47,000 with 50,900 shares outstanding and a stock price of $54, is calculated as 23.00.

Step-by-step explanation:

The student asked how to calculate the price earnings ratio for Richards Corporation, which had a net income of $165,425 and paid dividends of $47,000 to common stockholders. With 50,900 shares outstanding and a stock price of $54 per share, we need to determine which of the provided options represents the correct price earnings ratio.

To calculate the price earnings ratio, we divide the market price per share by the earnings per share (EPS). The EPS is calculated by dividing the net income available to common stockholders by the number of common shares outstanding. First, we find the EPS: ($165,425 - $47,000) / 50,900 shares = $2.33 EPS (approximate). Then, we calculate the price earnings ratio: $54 / $2.33 = 23.18, which we can round to 23.00. Therefore, the correct answer is c. 23.00.