Daniel Corporation Had Net Income for 2018 of $75,000

question 18

Multiple Choice

Daniel Corporation had net income for 2018 of $75,000.Daniel had 6000 shares of common stock outstanding at the beginning of the year and 22,000 shares of common stock outstanding at the end of the year.There were 8000 shares of preferred stock outstanding all year.During 2018,Daniel declared and paid preferred dividends of $26,000.On December 31,2018,the market price of Daniel's common stock is $45 per share and the market price of its preferred stock is $73 per share.What is Daniel's price/earnings ratio at December 31,2018? (Round any intermediate calculations and your final answer to the nearest cent.)

• A) 12.86
• B) 20.86
• C) 13.20
• D) 13.63

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Definitions:

Risk-Free Rate

The rate of return on an investment with no risk of financial loss, often represented by the yield on government Treasury bills.

Expected Market Rate

The forecasted rate of return anticipated by investors in the financial markets, based on current conditions and future projections.

Risk Premium

The extra return above the risk-free rate that investors require to hold a risky investment.

Reward-To-Risk Ratio

A metric utilized in financial analysis to evaluate the potential returns of an investment against the level of risk incurred to achieve those returns.