A corporation reported net income of $2,730,000 and paid preferred cash dividends of $120,000 during the current year. There were 600,000 weighted-average shares of common stock outstanding and the market price per common share at year-end was $58.30. Calculate the company's price-earnings ratio.
What will be an ideal response?
Price-Earnings Ratio = Market Price per Share/ [(Net Income - Preferred Dividends)/Weighted-Average Common Shares Outstanding]
Price-Earnings Ratio = $58.30/ [($2,730,000 - $120,000)/600,000 shares] = 13.4
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