Blitzen Corporation had net income of $200000 and paid dividends to common stockholders of $50000 in 2017. The weighted average number of shares outstanding in 2017 was 40000 shares. Blitzen Corporation's common stock is selling for $35 per share on the New York Stock Exchange. Blitzen Corporation's price-earnings ratio is
A) 5.6 times.
B) 7 times.
C) 5 times.
D) 9.3 times.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) = Net Income / Weighted average number of shares outstanding
EPS = $200000 / 40000 = $5 per share
Price-earnings ratio (P/E) = Market price per share / Earnings per share
P/E = $35 / $5 = 7 times.

Blitzen Corporation Had Net Income of $200000 and Paid Dividends