Question

Ale Corporation had net income of $240,000 and paid dividends to common stockholders of $40,000 in 2017. The weighted average number of shares outstanding in 2017 was 60,000 shares. Ale Corporation's common stock is selling for $76 per share on the New York Stock Exchange. Ale Corporation's price-earnings ratio is?

Answer 1

19times

Step-by-step explanation:

The solution can be seen in the picture attached

Answer 2

The price earnings ratio is 19:1

Step-by-step explanation:

The price earnings ratio tells us that how much price the investors are willing to pay for $1 of earnings provided by the company. The price earnings ratio is calculate by dividing the price per share by the earnings per share.

Price earnings ratio = Price per share / Earnings per share

The price per share is the market price of the stock.

The earnings per share is calculated using the following formula:

Earnings per share = Net Income / Weighted average shares outstanding

Earnings per share = 240000 / 60000 = $4 per share

The price earnings ratio = 76 / 4 = 19 / 1 or 19:1