The following information is available for Spellman Corporation: 2006 Market pri
ID: 2361524 • Letter: T
Question
The following information is available for Spellman Corporation: 2006 Market price per share of common stock $30.00 Earnings per share on common stock 4.00 Which of the following statements is correct? Answer a) The price-earnings ratio is 7.5 and a share of common stock was selling for 7.5 times the amount of earnings per share at the end of 2006. b) The price-earnings ratio is 13.3% and a share of common stock was selling for 13.3% more than the amount of earnings per share at the end of 2006. c) The price-earnings ratio is 7.5 and a share of common stock was selling for 150 times the amount of earnings per share at the end of 2006. The market price per share and the earnings per share are not statistically related to each other.Explanation / Answer
The following information is available for Spellman Corporation: 2006 Market price per share of common stock $30.00 Earnings per share on common stock 4.00 Which of the following statements is correct?
Answer
a) The price-earnings ratio is 7.5 and a share of common stock was selling for 7.5 times the amount of earnings per share at the end of 2006.
b) The price-earnings ratio is 13.3% and a share of common stock was selling for 13.3% more than the amount of earnings per share at the end of 2006.
c) The price-earnings ratio is 7.5 and a share of common stock was selling for 150 times the amount of earnings per share at the end of 2006. The market price per share and the earnings per share are not statistically related to each other.
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