Financial Learning Systems has 1.6 million shares of common stock outstanding and 68,592 shares of preferred stock. (The

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Financial Learning Systems Has 1 6 Million Shares Of Common Stock Outstanding And 68 592 Shares Of Preferred Stock The 1 (52.55 KiB) Viewed 11 times

Financial Learning Systems has 1.6 million shares of common stock outstanding and 68,592 shares of preferred stock. (The preferred pays annual cash dividends of $4.57 a share, and the common pays annual cash dividends of 20 cents a share.) Last year, the company generated net profit (after taxes) of $7,661,238. The company's balance sheet shows total assets of $87 million, total liabilities of $32 million, and $6 million in preferred stock. The firm's common stock is currently trading in the market at $41.02 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 $6.73 and the P/E ratio stays where it is? What will happen if EPS drops to $2.49 and the P/E doesn't change? c. What will happen to the price of the stock if EPS rises to $6.73 and the P/E jumps to 12.3 times earnings? d. What will happen if both EPS and the P/E ratio drop-to $2.49 and 4.7 times earnings, respectively? e. Comment on the effect that EPS and the P/E ratio have on the market price of the stock.