Question

Crane Corporation had net income of $2040000 and paid dividends to common stockholders of $303000 in 2017. The weighted average number of shares outstanding in 2017 was 510000 shares. Crane Corporation's common stock is selling for $36 per share on the NASDAQ. Crane Corporation's price-earnings ratio is

Answer 1

9 times

Step-by-step explanation:

The computation of price earning ratio is as seen below;

Earning per share = Net income ÷ Weighted average outstanding shares

= $2,040,000 ÷ 510,000

= 4

Price earning per share = Market price per share ÷ Earning per share

= $36 ÷ 4

= 9 times

Therefore, Crane Corporation's price earning ratio is 9 times