Dooley Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Dooley Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Dooley Corporation's price-earnings ratio is

Question

Quizplus · Accepted Answer

First, we need to calculate the earnings per share (EPS):
EPS = Net Income / Weighted Average Number of Shares Outstanding
EPS = $200,000 / 50,000 shares = $4 per share
Then, we can calculate the price-earnings (P/E) ratio:
P/E ratio = Price per share / EPS
P/E ratio = $50 per share / $4 per share = 12.5 times

Dooley Corporation Had Net Income of $200,000 and Paid Dividends