Stilley Corporation had earnings after taxes of $436,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.00. In 20X3, earnings after taxes declined to $206,000 with the same 200,000 shares outstanding. The stock price declined to $27.80.

a. Compute earnings per share and the P/E ratio for 20X2.

b. Compute earnings per share and the P/E ratio for 20X3.

c. Give a general explanation of why the P/E changed. You might want to consult the textbook to explain this surprising result.