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25 July, 05:46

Richards Corporation had net income of $166,152 and paid dividends to common stockholders of $48,100. It had 51,600 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $70 per share. The price-earnings ratio (rounded to two decimal places) is

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  1. 25 July, 08:15
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    21.74 times

    Explanation:

    The price-earnings ratio refers to the ratio of stock price to the earnings per share.

    Given that,

    Net income = $166,152

    Paid dividends to common stockholders = $48,100

    Common stock outstanding during the entire year = 51,600

    Selling price of common stock = $70 per share

    First, we have to calculate the earning per share.

    Earning per share:

    = Net income : Common stock outstanding

    = $166,152 : 51,600

    = $3.22

    Price-earnings ratio:

    = Market price : Earnings per share

    = $70 : $3.22

    = 21.74 times
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