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    challenge mather's Avatar
    challenge mather Posts: 19, Reputation: 1
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    #1

    Mar 23, 2008, 09:38 AM
    Earnings per share and P/E ratios
    Earnings after taxes of $280,00 in 2006 with 200,000 saresof stock outstanding. The stock price was $30.80. In 2007, earnings after taxes increased to $320,000 with the same 200,000 shares outstanding. The stock price was $40.00.
    a) Compute earnings per share and the P/E ratio for 2006.
    The P/E ratio equals the stock price divided by earnings per share.
    b) Compute earnings per share and the P/E ratio for 2007.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Mar 23, 2008, 12:18 PM
    Something per something is always the first something divided by the second something. This always works, for everything, every subject. This is no different than paying $50 for 4 shirts and wanting to know what you paid per shirt.

    You want earnings per share. That's always a division, in that order.

    You've already written the equation for P/E, which you can do once you have EPS.

    Give it a try.
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