During Year 1, Hollowell Corporation and Chester Corporation reported net incomes of $260,000 and $480,000 respectively. Both companies had 200,000 shares of common stock issued and outstanding. At December 31, Year 1, the market price per share of Hollowell's stock was $39 and Chester's stock was $36.
Required: a)Calculate the price-earnings ratio for:1)Hollowell2)Chesterb)Based on the price-earnings ratios computed in part (a), which company do investors believe has more potential for future income growth? Explain your answer.

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The Answer of During Year 1, Hollowell Corporation and Chester Corporation reported net incomes of $260,000 and $480,000 respectively. Both companies had 200,000 shares of common stock issued and outstanding. At December 31, Year 1, the market price per share of Hollowell's stock was $39 and Chester's stock was $36.
Required: a)Calculate the price-earnings ratio for:1)Hollowell2)Chesterb)Based on the price-earnings ratios computed in part (a), which company do investors believe has more potential for future income growth? Explain your answer.

During Year 1, Hollowell Corporation and Chester Corporation Reported Net