Question

Stout Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Stout Corporation's common stock is selling for $75 per share on the New York Stock Exchange. Stout Corporation's price-earnings ratio is Group of answer choices 3.8 times. 15 times. 18.8 times. 12 times.

Answer 1

18.8 times

Step-by-step explanation:

Calculation to determine what Stout Corporation's price-earnings ratio is

Using this formula

Price-Earning Ratio = Price Per Share ÷ (Net Earnings ÷ Outstanding Shares)

Let plug in the formula

Price-Earning Ratio= $75 ÷ ($200,000 ÷ 50,000)

Price-Earning Ratio= 75 ÷ 4

Price-Earning Ratio= 18.75

Price-Earning Ratio=18.8 times (Approximately)

Therefore Stout Corporation's price-earnings ratio is 18.8 times