During 2013, the Havens Corporation and the Childress Corporation reported net incomes of $280,000 and $500,000 respectively. Both companies had 200,000 shares of common stock issued and outstanding. At December 31, 2013, the market price per share of Havens' stock was $42 and Childress' stock was $35.
Required:
a) Calculate the price-earnings ratio for each company.
b) Based on the price-earnings ratios computed in part (a), which company do investors believe has more potential for future income growth? State your reason.

Question

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The Answer of During 2013, the Havens Corporation and the Childress Corporation reported net incomes of $280,000 and $500,000 respectively. Both companies had 200,000 shares of common stock issued and outstanding. At December 31, 2013, the market price per share of Havens' stock was $42 and Childress' stock was $35.
Required:
a) Calculate the price-earnings ratio for each company.
b) Based on the price-earnings ratios computed in part (a), which company do investors believe has more potential for future income growth? State your reason.

During 2013, the Havens Corporation and the Childress Corporation Reported