A company reported net income of $836,000 for the current year. The year-end market price per common share was $12 and there were 475,000 weighted-average shares of common stock outstanding. Calculate the company's price-earnings ratio.
What will be an ideal response?
Price-Earnings Ratio = Market Price per Share/ (Net Income/Weighted-Average
Common Shares Outstanding)
Price-Earnings Ratio = $12/ ($836,000/475,000 shares) = 6.8
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