Financial Statements for Larosa Company Appear Below Total Dividends During Year 2 Were

Multiple Choice

Financial statements for Larosa Company appear below:

$\begin{array}{|l|r|}\hline & \begin{array}{r}\text { Larned Company } \\\text { Income Statement }\\\text { For the Year Ended December 31, Year 2 }\\\text { (dollars in thousands) }\end{array} \\\\hline \text { Sales (All on Account) } & \$ 1870 \\\hline \text { Costs of Goods Sold } & \$ 1300 \\\hline \text { Gross Margin } & \$ 570 \\\hline \text { Operating Expenses } & \$ 220 \\\hline \text { Net Operating Income } & \$ 350 \\\hline \text { Interest Expense } & \$ 40 \\\hline \text { Net Income before Taxes } & \$ 310 \\\hline \text { Income Taxes }(30 \%) & \$ 93 \\\hline \text { Net Income } & \$ 217 \\\hline\end{array}$
Total dividends during Year 2 were $\$ 47,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31 , Year 2 was $\$ 70$ .



-Larosa Company's price-earnings ratio on December 31,Year 2 was closest to which of the following?

A) 4.97.
B) 7.10.
C) 7.44.
D) 22.66.