Answer:
- The price-earnings ratio is closest to:
B. 11.54
Explanation:
To find the Price-Earning Ratio first, it's necessary to deduct from the Net Income the part corresponding to Preferred Stock,
which is , $1,750,000 - (100,000*2,5= $250,000) = $1,500,000
Then we calculte the Earning/Share Ratio : $1,500,000/300,000 = 5
Finally with the Market Price of shares, we can calculate the Price Earnings Ratio ; $57,70 / $5 = 11,54
Shares of Common stock outstanding 300.000 780.000
Shares of Preferred stock outstanding 100.000 250.000
NET INCOME Available 1.500.000
The market price 57,70
Price–Earnings Ratio 11,54
Earnings/Share Ratio 5,00
NET INCOME $ 1.750.000
