Cadarette Corporation's most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $17.73 per share.
-The price-earnings ratio for Year 2 is closest to:
A)11.08
B)12.40
C)19.70
D)17.73

Question

Cadarette Corporation's most recent balance sheet and income statement appear below:    Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred  stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $17.73 per share.
-The price-earnings ratio for Year 2 is closest to:
A)11.08 
B)12.40 
C)19.70 
D)17.73

Quizplus · Accepted Answer

Number of common shares outstanding = Common stock F1F1F1S1F1F1F10 Par value
= $100 F1F1F1S1F1F1F10 $1 per share = 100 shares
Earnings per share = (Net Income - Preferred Dividends)
F1F1F1S1F1F1F10 Average number of common shares outstanding
= ($100 - $10)F1F1F1S1F1F1F10 (100 shares + 100 shares)/2 = $0.90 per share
Price-earnings ratio = Market price per share F1F1F1S1F1F1F10 Earnings per share
= $17.73 F1F1F1S1F1F1F10 $0.90 = 19.70

Cadarette Corporation's Most Recent Balance Sheet and Income Statement Appear