Question

SunlandCorporation had net income of $1940000 and paid dividends to common stockholders of $310000 in 2017. The weighted average number of shares outstanding in 2017 was 242500 shares. Sunland Corporation's common stock is selling for $56 per share on the NASDAQ. Sunland Corporation's price-earnings ratio is:_________

Answer 1

Answer:

Price-Earnings Ratio = 7

Explanation:

Income available to common share holders:

= Net Income - Preference Dividend

= $1,940,000 - $0

= $1,940,000

Weighted Average no. of shares = 242,500 shares

Earning Per Share (EPS):

= Income available to common share holders ÷ Weighted average no of shares

= $1,940,000 ÷ 242,500

= $8 per share

Market Price per Share (MPS) = $56

Price-Earnings Ratio = MPS ÷ EPS

                                  = $56 ÷ $8

                                  = 7