154. 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...

154. 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.