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Financial information for Forever 18 includes the following selected data: ($ in millions except share data) 2021 2020 Net income $ 182 $ 164 Dividends on preferred stock $ 34 $ 25 Average shares outstanding (in millions) 200 200 Stock price $ 11.27 $ 10.22 2-a. Calculate the price-earnings ratio in 2020 and 2021.
Financial information for Forever 18 includes the following selected data: ($ in millions except share data) 2021 2020 Net income $ 182 $ 164 Dividends on preferred stock $ 34 $ 25 Average shares outstanding (in millions) 200 200 Stock price $ 11.27 $ 10.22 2-a. Calculate the price-earnings ratio in 2020 and 2021.
Final answer:Theprice-earnings ratiofor Forever 18 in 2020 is 14.7 and in 2021 is 15.2. These ratios were calculated using the provided net income, dividends on preferred stock, average shares outstanding, and stock price.Explanation:Calculating the price-earnings ratio, also known as the P/E ratio, simply involves taking themarket valueper share (stock price) and dividing it by the earnings per share(EPS). Here, EPS is calculated as (Net income - Dividends on preferred stock) divided by the Average number of shares outstanding.So for2020, the EPS would be ($164 million - $25 million)/200 million = $0.695 per share. Thus, the P/E ratio equals $10.22/$0.695 = 14.7.For2021, the EPS would be ($182 million - $34 million)/200 million = $0.74 per share. Therefore, the P/E ratio = $11.27/$0.74 = 15.2.Learn more about the Price-earnings ratio here:brainly.com/question/31468094#SPJ11...