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What will happen to the price of the stock

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Question - Financial Learning Systems has 2.3 million shares of common stock outstanding and 85,853 shares of preferred stock.? (The preferred pays annual cash dividends of ?$4.62 a? share, and the common pays annual cash dividends of 22 cents a? share.) Last? year, the company generated net profit? (after taxes) of $8,179,204. The? company's balance sheet shows total assets of ?$86 ?million, total liabilities of $35 ?million, and $5 million in preferred stock. The? firm's common stock is currently trading in the market at ?$47.18 a share.

a. Given the preceding? information, find the? EPS, P/E? ratio, and book value per share.

b. What will happen to the price of the stock if EPS rises to ?$4.89 and the? P/E ratio stays where it? is? What will happen if EPS drops to ?$2.04 and the?P/E doesn't? change?

c. What will happen to the price of the stock if EPS rises to ?$4.89 and the? P/E jumps to 19.3 times? earnings?

d. What will happen if both EPS and the? P/E ratio drop-to ?$2.04 and 7.7 times? earnings, respectively?

e. Comment on the effect that EPS and the? P/E ratio have on the market price of the stock.

Reference no: EM132927714

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