question archive The balance sheets at the end of each of the first two years of operations indicate the following: Kellman Company Year 2Year 1Total current assets$613,137$554,523Total investments65,57152,386Total property, plant, and equipment857,810629,062Total current liabilities110,00780,868Total long-term liabilities324,900239,112Preferred 9% stock, $100 par93,34893,348Common stock, $10 par523,822523,822Paid-in capital in excess of par-common stock69,66569,665Retained earnings414,776229,156 Using the balance sheets for Kellman Company, if net income is $114,398 and interest expense is $36,688 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2 (rounded to two decimal places)? a

The balance sheets at the end of each of the first two years of operations indicate the following: Kellman Company Year 2Year 1Total current assets$613,137$554,523Total investments65,57152,386Total property, plant, and equipment857,810629,062Total current liabilities110,00780,868Total long-term liabilities324,900239,112Preferred 9% stock, $100 par93,34893,348Common stock, $10 par523,822523,822Paid-in capital in excess of par-common stock69,66569,665Retained earnings414,776229,156 Using the balance sheets for Kellman Company, if net income is $114,398 and interest expense is $36,688 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2 (rounded to two decimal places)? a

Subject:FinancePrice:2.85 Bought3

The balance sheets at the end of each of the first two years of operations indicate the following:

Kellman Company Year 2Year 1Total current assets$613,137$554,523Total investments65,57152,386Total property, plant, and equipment857,810629,062Total current liabilities110,00780,868Total long-term liabilities324,900239,112Preferred 9% stock, $100 par93,34893,348Common stock, $10 par523,822523,822Paid-in capital in excess of par-common stock69,66569,665Retained earnings414,776229,156

Using the balance sheets for Kellman Company, if net income is $114,398 and interest expense is $36,688 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2 (rounded to two decimal places)?

a.11.34

b.14.85

c.2.02

d.10.90

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The correct option is :

 

b. 14.85

 

 

?

Step-by-step explanation

 

 

 

First of all we need to calculate the Net Income available to Common Stockholders' as follows :

 

Net Income - Preferred Dividend

 

$114398 - 9% of $93348

 

$114398 - $8401.32

 

$105996.68

 

Now EPS can be calculated as follows :

 

Net Income available to Common Stockholders'

÷

Outstanding Common Shares

 

$105996.68

÷

52382.2 shares

 

$2.02 per share

 

P/E ratio can be calculated as follows :

 

Market Price per share

÷

EPS

 

$30 ÷ $2.02

 

14.85

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