Question

During the year, Blitzen Corporation had net income of $200,000, paid $40,000 in dividends to common stockholders, and paid $50,000 in dividends to preferred shareholders. The weighted average number of shares outstanding for the year was 40,000 shares, and Blitzen Corporation's common stock was selling for $35 per share on the New York Stock Exchange at the end of the year. Blitzen Corporation's price-earnings ratio is Select one: a. 5 times. b. 12.73 times. c. 7 times. d. 8.75 times. e. 9.33 times.

Answer 1

Answer:

e. 9.33 times

Explanation:

Data provided as per the given question

Price of share = $200,000 and $50,000

Earning per share = $40,000

The calculation of price-earnings ratio is shown below:-

Price earning ratio = Price of share ÷ Earning per share

= ($200,000 - $50,000) ÷ $40,000

= $3.75 per share

Therefore price earning ratio

= $35 ÷ $3.75

= 9.33 times