Dalmatian Corporation\'s annual report is as follows. March 31, 2016 March 31, 2
ID: 2456053 • Letter: D
Question
Dalmatian Corporation's annual report is as follows.
March 31, 2016
March 31, 2017
Net Income
$360,000
$428,500
Preferred Dividends
0
0
Total Stockholders' Equity
$4,250,000
$5,102,000
Stockholders' Equity attributable to Preferred Stock
0
0
Number of Common Shares Outstanding
290,464
196,168
If the current market price is $23 on March 31, 2016, compute the price/earnings ratio on March 31, 2017.
March 31, 2016
March 31, 2017
Net Income
$360,000
$428,500
Preferred Dividends
0
0
Total Stockholders' Equity
$4,250,000
$5,102,000
Stockholders' Equity attributable to Preferred Stock
0
0
Number of Common Shares Outstanding
290,464
196,168
Explanation / Answer
In this question we have to compute forward or estimated PE ratio as the market price for previous year given not of March 2017. A forward P/E ratio is a current stock's price over its "predicted" earnings per share
Forward P/E ratio= Market Price Per share/Estimated Earning per share
market price on march 31, 2016=$23
Estimated Earning Per share= Estimated Net Income/No. of shares outstanding on March 2017
428500/196169=$2.1843
Forward P/E Ratio=23/2.1843= 10.529 Answer
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