During 2016,the Hollowell Corporation and the Chester Corporation Reported Net

Essay

During 2016,the Hollowell Corporation and the Chester Corporation reported net incomes of $260,000 and $480,000 respectively.Both companies had 200,000 shares of common stock issued and outstanding.At December 31,2016,the market price per share of Hollowell's stock was $39 and Chester's stock was $36.
Required: a)Calculate the price-earnings ratio for each company.
b)Based on the price-earnings ratios computed in part (a),which company do investors believe has more potential for future income growth? State your reason.