Corporation had net income for 2016 of $ 42 comma 000. GAZ had 16 comma 000 shares of common stock outstanding at the beginning

Question

3 years ago

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Corporation had net income for 2016 of $ 42 comma 000. GAZ had 16 comma 000 shares of common stock outstanding at the beginning

of the year and 14 comma 000 shares of common stock outstanding as of December 31, 2016. During the year, GAZ declared and paid preferred dividends of $ 4 comma 500. Therefore, GAZ's earnings per share for 2016 is $ 2.50. Assume the market price of GAZ's common stock is $ 12 per share. Compute GAZ's price/earnings ratio. Select the formula, then enter the amounts to calculate the company's price/earnings ratio as of December 31, 2016. (Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round the ratio to two decimal places.) / = Price/earnings ratio / =

Business

1 answer:

andrey2020 [161] · Answer 1 · 2022-07-19T13:29:57+03:00

Answer:

GAZ's price/earnings ratio is 4.8

Explanation:

In order to calculate GAZ's price/earnings ratio we would have to calculate the following formula:

GAZ's price/earnings ratio=market value per share/earnings per share

market value per share= $ 12

earnings per share=net income- preferred dividend/Average number of common shares

earnings per share=$42,000-$4,500/(16,000+14,000)/2

earnings per share=$2.50

Therefore, GAZ's price/earnings ratio= $ 12/$2.50

GAZ's price/earnings ratio=4.8

GAZ's price/earnings ratio is 4.8