Ask Question
17 October, 10:25

The Crestar Company reported net income of $112,000 on 20,000 average 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 $95. What is this company's current price-earnings ratio?

+2
Answers (1)
  1. 17 October, 11:06
    0
    Price earnings ratio = 19 times.

    Explanation:

    Price earning ratio is calculated as for the common equity, as the earnings on preference share is fixed.

    Accordingly, the earnings for equity = Net income - preference dividend = $112,000 - $12,000 = $100,000

    Number of shares outstanding = 20,000

    Earnings per share = $100,000/20,000 = $5 per share.

    Selling price of the share = $95

    Thus, price earnings ratio = $95/$5 = 19 times.

    This reflects that the 19 times of earnings is the price of share.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares. Preferred dividends total $12,000. On the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers