Please refer to Table

42

for the following questions. Table

42

Drummond Company

Balance Sheet

Assets:
Cash and marketable securities		$400,000
Accounts receivable		1,415,000
Inventories		1,847,500
Prepaid expenses		24,000
Total current assets		3,686,500
Fixed assets	2,800,000
Less: accum. depr.	(1,087,500)
Net fixed assets		1,712,500
Total assets		$5,399,000
Liabilities:
Accounts payable		$600,000
Notes payable	875,000
Accrued taxes		92,000
Total current liabilities		$1,567,000
Longterm debt		900,000
Common Stock (100,000 shares)		700,000
Retained Earnings		2,232,000
Total liabilities and owner's equity		$5,399,000
Net sales (all credit)		$6,375,000
Less: Cost of goods sold		(4,375,000)
Selling and administrative expense		(1,000,000)
Depreciation expense		(135,000)
Interest expense		(100,000)
Earnings before taxes		$765,000
Income taxes		(306,000)
Net income		$459,000

Based on the information in Table

42,

and assuming the company's stock price is $50 per share, the P/E ratio is

A. 24.44

B. 14.33

C. 27.5

D. 10.89