Use This Information for Kellman Company to Answer the Questions $\text { Kellman Company }$

question 1

Multiple Choice

Use this information for Kellman Company to answer the questions that follow.
​
The balance sheets at the end of each of the first two years of operations indicate the following:
​
$\text { Kellman Company }$
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$
-Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation to two decimal places and final answers to one decimal place.)

• A) 7.5
• B) 13.4
• C) 12.1
• D) 8.5

---

Definitions:

Sensation Seeking

A trait characterized by the seeking of varied, novel, complex, and intense sensations and experiences, even if this involves physical, social, legal, or financial risks.

Police Officer

A law enforcement member tasked with maintaining public order, safety, and enforcing laws.

Race-Car Driver

An individual specialized in competing in high-speed motor vehicle races.

Zuckerman

A surname associated with Marvin Zuckerman, an American psychologist known for his research on sensation seeking and personality.