Question

g. provides the following information for 20X8: Net income $260,000 Market price per share of common stock $60 per share Dividends paid $200,000 Common stock outstanding at Jan. 1, 2018 150,000 shares Common stock outstanding at Dec. 31, 2018 230,000 shares The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock.

Answer 1

53.09

Step-by-step explanation:

The price/earnings ratio of common stock is an investment ratio that compares the current price of the stock to its earnings per share, in a bid to assess the stock performance relative to its earnings

share price=$60

earnings per share=net income/year-end shares outstanding

net income=$260,000

year-end outstanding shares=230,000

earnings per share=$260,000/230,000

earnings per share=$1.13

price/earningsratio=$60/$1.13

price/earningsratio=53.09