Knife Corp ​
-Refer to the Data for Knife Corp

question 6

Essay

Knife Corp.
Use the selected data presented below from the financial statements of Knife Corp.for 2018 and 2017 to answer the questions that follow.
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$\begin{array}{lrr}&2018&2017\\\text { Net income } & \$ 110,000 & \$ 123,000 \\\text { Cash dividends paid on preferred stock } & \$ 12,000 & \$ 15,000 \\\text { Cash dividends paid on common stock } & \$ 42,000 & \$ 38,000 \\\text { Weighted average number of common shares outstanding } & 105,000 & \$ 5,000 \\\text { Market price per share of common stock at the end of the year } & \$ 16.00 & \$ 13.00\end{array}$ ​
-Refer to the data for Knife Corp.
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Required
(A)Calculate earnings per share for 2018 for Knife.Why is this considered one of the most quoted ratios for public companies? Which investors,common or preferred or both,desire this information?
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(B)Calculate the price/earnings ratio for 2018 for Knife.Why is this ratio important to investors? Explain.

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Definitions:

Intuition

A cognitive process that enables people to make decisions without the use of analytical reasoning.

Escalation of Commitment

A behavioral phenomenon where an individual or group continues to invest in a decision despite evidence of its failure, often because of the resources already committed.

Support

Support refers to the assistance or backing provided by individuals or groups, intended to aid someone else's efforts or initiatives.

Emotions

Complex psychological states that involve physiological changes, feelings, cognitive processes, and behavioral responses.