Question

Michelle Townsend owns stock in National Computers. Based on information in its annual report, National Computers reported after-tax earnings of $9,216,000 and has issued 5,120,000 shares of common stock. The stock is currently selling for $33 a share.a. Calculate the earnings per share for National Computers. (Round your final answer to 2 decimal places.)Earnings per share $b. Calculate the price-earnings (PE) ratio for National Computers. (Use the rounded earnings per share from part a. Round your final answer to 2 decimal places.)Price-earnings ratio

Answer 1

Answer:

a. $1.80

b. 18.33 times

Explanation:

The computation of the earning per share is shown below:

a. Earning per share = (Net income after tax) ÷ (Number of shares)

                               = ($9,216,000) ÷ (5,120,000 shares)

                               = $1.80

b. And, the Price-earnings ratio = (Market price per share) ÷ (Earning per share)

= $33 ÷ $1.80

= 18.33 times