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Answer:
a) <em>Earnings Per Share for 20X2 = 2.19</em>
<em>P/E ratio for 20X2 = 19.22</em>
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<em>b) Earnings Per Share for 20X3 = 1.04</em>
<em>P/E ratio for 20X3 = 27.21</em>
Explanation:
a) Compute earnings per share and the P/E ratio for 20X2.
The compute the earnings per share use the following:
Earnings Per Share for 20X2 = (Earnings after tax-Preference Dividend) / shares outstanding
Earnings Per Share for 20X2 = 2.19
Then find P/E ratio:
P/E ratio for 20X2 = Market Price per share / Earnings Per Share
P/E ratio for 20X2 = 19.22
b) Compute earnings per share and the P/E ratio for 20X3.
The compute the earnings per share use the following:
Earnings Per Share for 20X3 =(Earnings after tax-Preference Dividend) / shares outstanding
Earnings Per Share for 20X3 = 1.04
Then find P/E ratio:
P/E ratio for 20X3 = Market Price per share / Earnings Per Share
P/E ratio for 20X3 = 27.21