Daniel Corporation had net income for 2018 of $75,000.Daniel had 6000 shares of common stock outstanding at the beginning of the year and 22,000 shares of common stock outstanding at the end of the year.There were 8000 shares of preferred stock outstanding all year.During 2018,Daniel declared and paid preferred dividends of $26,000.On December 31,2018,the market price of Daniel's common stock is $45 per share and the market price of its preferred stock is $73 per share.What is Daniel's price/earnings ratio at December 31,2018? (Round any intermediate calculations and your final answer to the nearest cent.)
A) 12.86
B) 20.86
C) 13.20
D) 13.63

Question

Quizplus · Accepted Answer

Average number of common shares outstanding: (22,000 + 6000) / 2 = 14,000
Earnings Per Share = (Net income - Preferred dividends) / Average number of common shares outstanding
Earnings Per Share = ($75,000 - $26,000) / 14,000
Earnings Per Share = $3.50
Price/earnings ratio = Market price per share of common stock / Earnings per share
Price/earnings ratio = $45 / $3.50 = 12.86

Daniel Corporation Had Net Income for 2018 of $75,000