Doonan Corporation has provided the following financial data from its balance sheet and income statement: The market price of common stock at the end of Year 2 was $4.79 per share.The company's price-earnings ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) 0.76
B) 10.64
C) 16.52
D) 7.73

Question

Doonan Corporation has provided the following financial data from its balance sheet and income statement:  The market price of common stock at the end of Year 2 was $4.79 per share.The company's price-earnings ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) 0.76 
B) 10.64 
C) 16.52 
D) 7.73

Quizplus · Accepted Answer

First, we need to calculate the earnings per share (EPS) for Year 2:

EPS = Net Income / Number of Common Shares Outstanding
EPS = $6,000 / 4,000
EPS = $1.50 per share

Next, we can use the market price of common stock and the EPS to calculate the price-earnings ratio (P/E ratio) for Year 2:

P/E ratio = Market Price per Share / EPS
P/E ratio = $4.79 / $1.50
P/E ratio = 3.19

Therefore, the closest answer choice is C) 16.52.

Doonan Corporation Has Provided the Following Financial Data from Its