Answer:
New P/E ratio = 11 .00 times
Explanation:
Repurchasing the common stock would mean the company buying back certain units of of the common stock which it had earlier issued to its common stock holders.
This it could do to avoid its earning per share (EPS) not been diluted.
Price earning (P/E) ratio is the ratio of the market price of a share to its Earnings per share (EPS).
P/E = Market price / EPS
Total earnings before re-purchase = EPS × number of shares before repurchase
= $1.84× 20,000 = $36,800
The units of shares re-purchased back
= Amount paid/ Market price per share
= $75,000/24 = 3,125 units
Total number of shares after repurchase = 20,000 - 3,125 = 16875 units
New EPS after repurchase= $36,800 / 23,125 units= 2.18
New P/E ratio = 24/2.18 = 11.00 times
New P/E ratio = 11 .00 times
