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:
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:
A) 0.76 
B) 10.64 
C) 16.52 
D) 7.73

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $26,300 ÷ 90,000 shares = $0.29 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $360,000 ÷ $4 per share = 90,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $4.79 ÷ $0.29 = 16.52 (rounded)

Doonan Corporation Has Provided the Following Financial Data from Its