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Botox Facial Care had earnings after taxes of $298,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $58.80. In 20X2, earnings after taxes increased to $330,000 with the same 200,000 shares outstanding. The stock price was $70.00. a. Compute earnings per share and the P/E ratio for 20X1. (The P/E ratio equals the stock price divided by earnings per share.) (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

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Karabo99

Answer:

The earnings per share for 20X1 is $1.49

The P/E ratio for 20X1 is $39.46

Explanation:

a. Earning per shares = Earning after Taxes / total Shares outstanding

                                    = $298,000/200,000

                                    = $1.49

Therefore, The earnings per share for 20X1 is $1.49

P/E RATIO = Price Per shares/Earning per shares

                 = $58.80/$1.49

                 = $39.46

Therefore, The P/E ratio for 20X1 is $39.46