Bogart Company has 40,000 shares of common stock outstanding.The book value per share of this stock was $60.00 and the market value per share was $75.00 at the end of the year.Net income for the year was $400,000.Interest on long-term debt was $40,000.Dividends paid to common stockholders were $3.00 per share.The tax rate was 30 percent.The company's price-earnings ratio at the end of the year was

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market value per share by the earnings per share. The earnings per share is calculated by dividing the net income by the number of shares outstanding. In this case, the net income is $400,000 and the number of shares outstanding is 40,000. Therefore, the earnings per share is $10.00. The market value per share is $75.00. Therefore, the price-earnings ratio is $75.00 / $10.00 = 7.5.

Bogart Company Has 40,000 Shares of Common Stock Outstanding