A company has net income of $910,000; its weighted-average common shares outstanding are 182,000. Its dividend...

A company has net income of $910,000; its weighted-average common shares outstanding are 182,000. Its dividend per share is $0.55, its market price per share is $90, and its book value per share is $79.00. Its price-earnings ratio equals:

15.80.
18.00.
11.00.
11.55.
10.45.

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Expert Solution

Answer:

Formula for Price earning ratio = Market value per share / Earnings Per share

Earnings Per share = Net Income / weighted-average common shares outstanding
= $910,000 / 182,000 shares
= $5 per share

Price earning ratio      = Market value per share / Earnings Per share
                                            =      $90 / $5 per share
                                            =     18.00

Price earning ratio = 18.00
Option (b) is correct.

ekkarill92 answered 1 year ago

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