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1 April, 11:31

A corporation has $7,000,000 in income after paying preferred dividends of $500,000. The company has 1,000,000 shares of common stock outstanding. The market price of the stock is $56. What is the price-earnings ratio

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  1. 1 April, 14:32
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    Price earning ratio = 8 times

    Explanation:

    Price earning ratio = Price per share / Earnings per share

    Price per share = 56, EPS = ?

    Price per share = 56, EPS = Total earnings available to ordinary shareholders/Number of shares

    7,000,000/1,000,000 = $7 per share

    Price earning ratio = 56/7 = 8 times

    Price earning ratio = 8 times
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