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12 August, 20:51

A company has net income of $865,000; its weighted-average common shares outstanding are 173,000. Its dividend per share is $1.30, its market price per share is $105, and its book value per share is $101.5. Its price-earnings ratio equals (Do not round your intermediate calculations) : a. 2.20. b. 20.30. c. 21.00. d. 3.50. e. 4.80.

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  1. 13 August, 00:09
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    c. 21.00

    Explanation:

    The formula to compute the price earning ratio is shown below:

    Price-earnings ratio = (Market price per share) : (Earning per share)

    where,

    Market price per share is $105

    And, the earning per share would be

    = Net income : weighted-average common shares outstanding

    = $865,000 : 173,000 shares

    = $5

    Now put these values to the above formula

    So, the per share would equal to

    = $105 : $5

    = 21
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