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Question(s) / Instruction(s):

The following information pertains to Lance Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets  

Cash and short-term investments                     $40,000

Accounts receivable (net)                                      30,000

Inventory                                                                   25,000

Property, plant and equipment                         215,000

Total Assets                                                           $310,000

Liabilities and Stockholders’ Equity          

Current liabilities                                                     $60,000

Long-term liabilities                                                 95,000

Stockholders\' equity—common                                        155,000

Total Liabilities and Stockholder’s Equity                         $310,000

Income Statement         

Sales                                                                           $90,000

Cost of goods sold                                                     45,000

Gross margin                                                              45,000

Operating expenses                                                  20,000

Net income                                                               $25,000

Number of shares of common stock                       6,000

Market price of common stock                                 $20

Dividends per share on common stock                    1.00

Cash provided by operations                                $40,000

What is the price earnings ratio for this company?

A.            6 times

B.            4.2 times

C.            4.8 times

D.            8 times

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