Financial Learning Systems has 2.34 million shares of common stock outstanding and 126,779 shares of preferred stock. (The preferred pays annual cash dividends of $5.24 ashare, and the common pays annual cash dividends of 21 cents ashare.) Lastyear, the company generated net profit(after taxes) of $6,869,423.Thecompany's balance sheet shows total assets of $71 million, total liabilities of$26 million, and $5 million in preferred stock. Thefirm's common stock is currently trading in the market at $39.31 a share.

a.Given the precedinginformation, find theEPS, P/Eratio, and book value per share.

b.What will happen to the price of the stock if EPS rises to $4.04 and theP/E ratio stays where itis? What will happen if EPS drops to $1.69 and theP/E doesn'tchange?

c.What will happen to the price of the stock if EPS rise to $4.04 and theP/E jumps to 21.3 timesearnings?

d.What will happen if both EPS and theP/E ratio dropto $1.69 and 8.9 timesearnings, respectively?

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