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strojnjashka [21]
3 years ago
14

Botox Facial Care had earnings after taxes of $340,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $74

.80. In 20X2, earnings after taxes increased to $378,000 with the same 200,000 shares outstanding. The stock price was $83.00.
a. Compute earnings per share and the P/E ratio for 20X1. (The P/E ratio equals the stock price divided by earnings per share.) (Do not round intermediate calculations. Round your final answers to 2 decimal places.)




b. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)




c. Why did the P/E ratio change? (Do not round intemediate calculations. Input your answers as percents rounded to 2 decimal places.)
Business
1 answer:
scoundrel [369]3 years ago
3 0

Answer:

$1.7; 44 times

Explanation:

a) EPS(20X1):

= Earnings after taxes / Number of shares

= $340,000 / 200,000

= $1.7

P/E ratio(20X1):

= Price / EPS

= $74.80 / $1.7

= 44 times

EPS(20X2):

= Earnings after taxes / Number of shares

= $378,000 / 200,000

= $1.89

P/E ratio(20X2):

= Price / EPS

= $83.00 / $1.89

= 43.92 times

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