Weightman Corporation's net operating income in Year 2 was $76,385,net income before taxes was $55,385,and the net income was $36,000.Total common stock was $200,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $983,000 and at the end of Year 1 to $950,000.The market price per share at the end of Year 2 was $7.92.The company's price-earnings ratio for Year 2 is closest to:
A) 7.14
B) 0.58
C) 5.18
D) 11.00

Question

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $36,000 ÷ 50,000 shares = $0.72 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $200,000 ÷ $4 per share = 50,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $7.92 ÷ $0.72 = 11.00 (rounded)

Weightman Corporation's Net Operating Income in Year 2 Was $76,385,net