Miley Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Miley Corporation's common stock is selling for $30 per share on the New York Stock Exchange.
Miley Corporation's price-earnings ratio is

Question

Quizplus · Accepted Answer

First, we need to calculate the earnings per share (EPS) by dividing the net income by the number of shares outstanding:

EPS = Net Income / Number of Shares Outstanding 
EPS = $250,000 / 50,000 
EPS = $5

Next, we can calculate the price-earnings ratio (P/E ratio) by dividing the current stock price by the EPS:

P/E Ratio = Stock Price / EPS 
P/E Ratio = $30 / $5 
P/E Ratio = 6

Therefore, the P/E ratio for Miley Corporation is 6 times. Choice B is the correct answer.

Miley Corporation Had Net Income of $250,000 and Paid Dividends