Answer:
Explanation:
a)
earning per share = Net income / outstanding shares
= $9,750,000 / 5,500,000 = $1.77
price earning ratio = Current stock price \ earning per share
= $39.50 \ $1.77 = 22.32
new Earning per share = Net income / outstanding shares
= $9,750,000 * 125% / 8,400,000 = $1.45
the stock price after one year would be
= Price earning ratio * New earning per share = 22.32 * $1.45 = $32.36
b)
Market to book ratio = Market value/ book value
Market value = Share price * number of outstanding shares
= $47.12 * 8,400,000 shares = $395,808,000
book value is $54,364,800
M/B = $395,808,000 / $54,364,800 = 7.28 times
Is it possible for a company to exhibit a negative EPS and thus a negative P/E ratio?
Yes, if company is having losses
