Question

A company reports the following: Net income $410,000 Preferred dividends $60,000 Shares of common stock outstanding 50,000 Market price per share of common stock $84 Determine the company's price-earnings ratio (round to one decimal place).

Answer 1

12

Step-by-step explanation:

Calculation to determine Determine the company's price-earnings ratio

First step is to calculate the Earnings per Share

on Common Stock

Earnings per Share

on Common Stock = ($410,000 – $60,000) ÷ $50,000

Earnings per Share on Common Stock = $7

Now let calculate thecompany's price-earnings ratio

Price-Earnings Ratio = $84÷$7

Price-Earnings Ratio = 12

Therefore the company's price-earnings ratio is 12