the balance sheet at the end of each of the first 2 years of

the balance sheet at the end of each of the first 2 years of operations indicate the following
                          2012.                  2011
total current assets. 600000.      560000
total invest.             60000.             40000
property plant & equip. 900000.     700000
current liab.             125000.           65000
long term liab.         350000.          250000
preferred 9% stock 100 par. 100000. 100000
common stock 10 par.     600000.      600000
paid in capital in excess of par common stock
                                    75000.             75000
retained earnings.       310000.         210000

If net income is 115000 and interest expense is 30000 for 2012 and the market price is 30 what is the price earnings ratio on common stock for 2012 round intermediate calc. to 2 decimal places and final answers to 1 decimal place

Solution

CALCULATION OF EARNING PER SHARES Earning per shares = Net Income / total Shares outstanding total Shares Outstanding = $ 600,000 / $ 10 = 60,000 Shares STEP 2: CALCULATION OF THE RATIO Year 2012 Earning Per shares = Net Income = $                 1,15,000 Divide By \"/\" By Number of Shares Outstanding                         60,000 Earning Per shares = $                         1.92 Earning Per Shares = $                         1.92 CALCULATION OF PE RATIO = Price Per shares / Earning per shares Year 2012 PE Ratio = Market Price Per shares = $                       30.00 Divide By \"/\" By Earning Per shares =                              1.92 PE Ratio = $                         15.7 STEP 3: ANSWER PE Ratio = $                         15.7 Answer = PE Ratio =   $                         15.7