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23 February, 03:56

The common stock of Rob's Discount Furniture is currently selling at $65.20 a share. The company adheres to a 60% dividend payout ratio and has a P/E ratio of 19. There are 42,000 shares of stock outstanding. What is the amount of the annual net income for the firm?

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  1. 23 February, 04:19
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    The amount of the annual net income for the firm is $144,123

    Explanation:

    In this question, first we have to apply the P/E ratio formula which is shown below:

    P/E ratio = (Market price) : (earning per share)

    19 = ($65.20) : (earning per share)

    So, the earning per share is 3.4315

    Now, we know that,

    The earning per shares = (Net income) : (Number of outstanding shares)

    3.4315 = (Net income) : (42,000 shares)

    So, the net income is $144,123
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