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Trenton Company has provided the following information: Net income, $150,000; Preferred shares issued, 5,100; Weighted average number of shares of common stock issued, 23,100; Cash dividends declared and paid on common stock, $21,000; Market price per share, $27; Weighted average number of treasury shares of common stock, 3,100. What is Trenton's price/earnings ratio

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ayokenny2001

Answer:

See below

Explanation:

With regards to the above, Trenton's price/earning ratio is computed as = Stock price per share / Earnings per share.

First, we will calculate Trenton's earnings per share

= Net income / Weighted average number of common shares outstandings

= $150,000 / (23,100 - 3,100)

= $150,000 / 23,000

= $6.52

Therefore,

Trenton's price earning ratio = $27 / $6.52 = 4.14

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