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Financial Learning Systems has 2.5 million shares of common stock outstanding and 100,297 shares of preferred stock. (The preferred pays annual cash dividends of $5.84
Financial Learning Systems has 2.5 million shares of common stock outstanding and 100,297 shares of preferred stock. (The preferred pays annual cash dividends of $5.84 a share, and the common pays annual cash dividends of 30 cents a share.) Last year, the company generated net profit (after taxes) of $7,107,129. The company's balance sheet shows total assets of $82 million, total liabilities of $30 million, and $5 million in preferred stock. The firm's common stock is currently trading in the market at $37.12 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 $3.84 and the P/E ratio stays where it is? What will happen if EPS drops to $1.52 and the P/E doesn't change? c. What will happen to the price of the stock if EPS rises to $3.84 and the P/E jumps to 19.4 times earnings? d. What will happen if both EPS and the P/E ratio drop-to $1.52 and 7.5 times earnings, respectively? e. Comment on the effect that EPS and the P/E ratio have on the market price of the stock
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