Calculation of Share Ratios
Not what you're looking for?
P7.9-Financial Learning Systems has 2.6 million shares of common stock outstanding and 74,908 shares of preferred stock. (The preferred pays annual cash dividends of $5.63 a share, and the common pays annual cash dividends of 33 cents a share.) Last year, the company generated net profit (after taxes) of $ 6,709, 324.
The company's balance sheet shows total assets of $71 million, total liabilities of $ 29 million, and $ 4 million in preferred stock. The firm's common stock is currently trading in the market at $53.59 a share.
a. Given the preceding information, find the EPS, P/E ratio, and book value per share.
b. What will happen to the price of the stock if EPS rises to $3.65 and the P/E ratio stays where it is? What will happen if EPS drops to $1.54 and the P/E doesn't change?
c. What will happen to the price of the stock if EPS rises to $3.65 and the P/E jumps to 31.4 times earnings?
d. What will happen if both EPS and the P/E ratio drop long dash to $1.54 and 11.4 times earnings, respectively?
e. Comment on the effect that EPS and the P/E ratio have on the market price of the stock.
Purchase this Solution
Solution Summary
This excel solution shows step by step calculation of earnings per share (EPS) under different scenarios and how changes in EPS and P/E ratios affect the market price per share.
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
Recent Feedback
- "ty i have more need help with"
- "ty i have jmore i need help with"
- "great help"
- "excellent help"
- "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.