The annual report of Redd Cars, Inc., for the year ended December 31, 2014, included the following

Question:

The annual report of Redd Cars, Inc., for the year ended December 31, 2014, included the following items (in millions):

Preferred stock outstanding, 3%........................................ $700

Net income......................................................................... $620

Average number of shares of common stock outstanding... 700

1. Compute earnings per share (EPS) and the price-earnings ratio for Redd Cars’ stock.

Round to the nearest cent. The price of a share of Redd Car stock is $11.83.

2. How much does the stock market say $1 of Redd Cars’ net income is worth?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...