The common stock of Rob's Discount Furniture is currently selling at $65.20 a share. The company adheres to a 60% dividend payout ratio and has a P/E ratio of 19. There are 42,000 shares of stock outstanding. What is the amount of the annual net income for the firm?

The amount of the annual net income for the firm is $144,123

Explanation:

In this question, first we have to apply the P/E ratio formula which is shown below:

P/E ratio = (Market price) : (earning per share)

19 = ($65.20) : (earning per share)

So, the earning per share is 3.4315

Now, we know that,

The earning per shares = (Net income) : (Number of outstanding shares)

3.4315 = (Net income) : (42,000 shares)

So, the net income is $144,123