The Crestar Company reported net income of $64,600 on 14,000 average outstanding common shares. Preferred dividends total $11,400. On the most recent trading day, the preferred shares sold at $44 and the common shares sold at $74. What is this company's current price-earnings ratio? (Do not round your intermediate calculations.)
A) 16.04
B) 19.47
C) 21.67
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated by dividing the market price per share by the earnings per share (EPS). First, calculate EPS: (Net Income - Preferred Dividends) / Average Outstanding Common Shares = ($64,600 - $11,400) / 14,000 = $3.80. Then, divide the market price per common share by EPS: $74 / $3.80 = 19.47.

The Crestar Company Reported Net Income of $64,600 on 14,000