Stilley Corporation had earnings after taxes of $459,000 in 20X2 with 270,000 shares outstanding. The stock...

Stilley Corporation had earnings after taxes of $459,000 in 20X2 with 270,000 shares outstanding. The stock price was $45.10. In 20X3, earnings after taxes declined to $324,000 with the same 270,000 shares outstanding. The stock price declined to $32.50.

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

b. Compute earnings per share and the P/E ratio for 20X3. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Solutions

Expert Solution

a.
	Earning Per Share	$ 1.70
	P/E Ratio	26.53

	Working:

	Earning Per Share	=	Earning After Tax/Shares outstanding
		=	$ 4,59,000	/	2,70,000
		=	$ 1.70

	P/E Ratio	=	Stock Price Per Share/Earning Per Share
		=	$ 45.10	/	$ 1.70
		=	26.53

b.
	Earning Per Share	$ 1.20
	P/E Ratio	27.08

	Working:

	Earning Per Share	=	Earning After Tax/Shares outstanding
		=	$ 3,24,000	/	2,70,000
		=	$ 1.20

	P/E Ratio	=	Stock Price Per Share/Earning Per Share
		=	$ 32.50	/	$ 1.20
		=	27.08

jeff jeffy answered 1 year ago

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