If extra dividend is given,
Dividend per share = Net income / Number of shares outstanding
Dividend per share = $ 27,000 / 4,500 shares
Dividend per share = $ 6 per share
Now. the price will reduce by $ 6 per share
Earnings per share will be $ 2.70 per share.
Price earnings ratio = New price / Earnings per share
Price earnings ratio = $ 96 - $ 6 / $ 2.70 = 33.33
If the shares were purchased from $ 27,000 -
Number of shares purchased = $ 27,000 / $ 96 = 281.25 or 281 shares
Total earnings = $ 2.70 X 4,500 shares = $ 12,150
New EPS = $ 12,150 / (4500 shares - 281 shares) = $ 2.88 per share
New Price earnings ratio = Price / Earnings per share
New Price earnings ratio = $ 96 / $ 2.88 = 33.33
