Question

Michelle Townsend owns stock in National Computers. Based on information in its annual report, National Computers reported after-tax earnings of $7,436,000 and has issued 2,860,000 shares of common stock. The stock is currently selling for $39 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.

Answer 1

Earnings per share=2.6

Price earning ratio= 15

Step-by-step explanation:

Michelle Townsends owns a stock in National computers

The National computers reported an after-tax earnings of $7,436,000

They issued 2,860,000 common shares

The stock is currently selling at $39 per share

(A) The earnings per share of National computers can be calculated as follows

= After-tax earnings/number of stock

= 7,436,000/2,860,000

= 2.6

(B) The price earning ratio of national computers can be calculated as follows

Price warning ratio= stock price/earnings per share

= 39/2.6

= 15

Hence the earning per share and price earning ratio of national computers are 2.6 and 15 respectively