In 2018, Bayer AG generated net profits (after taxes) of €2,117 million, reported sales of €14,647 million, and had 933 million common shares outstanding. It pays €1.5 per share in common dividends, and their common stock trades at €55 per share. The company’s balance sheet shows total assets of €83,502 million, total liabilities of €52,589 million, and total stockholders’ equity of €2,387 million. Suppose the company decides to issue 1 million shares of preferred stock, which will pay annual cash dividends of €50 per share. The total value of the preferred stock will increase equity by €10 million. 

a. Find Bayer’s EPS and P/E ratio.
b. What will happen to the price of the stock if EPS rises to €2.5, and the P/E ratio stays where it is? What will happen if EPS drops to €1.5 and the P/E doesn’t change?
c. What will happen to the price of the stock if EPS rises to €2.5 and the P/E ratio increases to 30?
d. What will happen to the price of the stock if EPS drops to €1.5 and the P/E ratio decreases to 10?
e. Comment on the effect that EPS and the P/E ratio have on the market price of the stock.