Botox Facial Care had earnings after taxes of $292,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $45.80. In 20X2, earnings after taxes increased to $320,000 with the same 200,000 shares outstanding. The stock price was $74.00.
Required:
a. Compute earnings per share and the P/E ratio for 20X1.
b. Compute earnings per share and the P/E ratio for 20X2.
c. Why did the P/E ratio change?