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23 November, 12:49

Beta Corporation had net income of $325,000 and paid dividends to common stockholders of $39,000 in 2017. The weighted average number of shares outstanding in 2017 was 50,000 shares. Beta Corporation's common stock is selling for $52 per share on the New York Stock Exchange. Beta Corporation's price-earnings ratio is

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  1. 23 November, 13:10
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    The price earnings ratio for Beta corporation is 8 times

    Explanation:

    The formula for price-earnings ratio is the stock market price divided by the stock earnings per share.

    The stock market price has been given as $52 per share

    the earnings per share=net income-preferred dividends/weighted average number of shares

    net income is $325,000

    preferred dividends is $0

    weighted average number of shares is 50,000

    earnings per share = ($325,000-$0) / 50,000=$6.5

    price earnings ratio=$52/$6.5 = 8 times
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