Exercise 11-19A (Algo) Using the P/E ratio LO 11-9

Lake Incorporated and the River, Incorporated reported net incomes of $204,000 and $164,000, respectively, for the most recent fiscal year. Both companies had 40,000 shares of common stock issued and outstanding. The market price per share of Lakes stock was $67, while Rivers sold for $71 per share. Required a. Determine the P/E ratio for each company. b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in income?