Question

Michelle Townsend owns stock in National Computers. Based on information in its annual report, National Computers reported after-tax earnings of $9,700,000 and has issued 7,000,000 shares of common stock. The stock is currently selling for $32 a share. a. Calculate the earnings per share for National Computers. (Round your answer to 2 decimal places.) b. Calculate the price-earnings (PE) ratio for National Computers. (Use the rounded earnings per share from part a. Round your answer to 2 decimal places.)

Answer 1

Answer:

1. Earnings per share = $1.39

2. Price earning ratio = $23.02

Explanation:

1.  Earnings per share = After tax income / Number of shares

Earnings per share = $9,700,000 / 7,000,000

Earnings per share = $1.39

2. Price earning ratio = Price per share / Earning per shares

Price earning ratio = $32 / $1.39

Price earning ratio = $23.02