In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. They had 50,000 shares of common stock outstanding during the entire year. Robert Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Robert Corporation's price-earnings ratio is
A) 10 times.
B) 5 times.
C) 2 times.
D) 8 times.

Question

Quizplus · Accepted Answer

The price-earnings ratio is calculated as the market price per share divided by the earnings per share (EPS). EPS is net income divided by the number of shares outstanding. Here, EPS = $250,000 / 50,000 = $5. The price-earnings ratio = $50 / $5 = 10 times.

In 2012 Robert Corporation Had Net Income of $250,000 and Paid