The Crestar Company reported net income of $100,000 on 20,000 outstanding common shares. Preferred dividends total $12,000. On the most recent trading day, the preferred shares sold at $50 and the common shares sold at $80. What is this company's current price-earnings ratio? (rounded)
A)16
B)18
C)20
D)None of the other answers are correct.

Question

Quizplus · Accepted Answer

The price-earnings ratio is: market price per share/earnings per share; earnings per share: (Net income - preferred dividend)/average common shares outstanding. EPS: ($100,000 - $12,000)/20,000 = $4.40 PE ratio: $80/$4.40 = 18.18

The Crestar Company Reported Net Income of $100,000 on 20,000