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.
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The balance sheets at the end of each of the first two years of operations indicate the following:
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$\text { Kellman Company }$
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$
-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

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Definitions:

Associative Strength

The measure of how strongly two ideas or experiences are connected in the mind, influencing the ability to learn associations.

Training Trial

An instance or episode during which a learning process is implemented, aimed at teaching a specific skill or behavior.

Rescorla And Wagner

A model proposing that the strength of learning is determined by the extent to which a conditioned stimulus (CS) is surprising or unexpected, pertaining to classical conditioning.

Learned Irrelevance

The presentation of a stimulus without an unconditioned stimulus (UCS) leads to the recognition that the stimulus is irrelevant, stops attention to that stimulus, and impairs conditioning when the stimulus is later paired with the UCS.