PROBLEMS (l) X has an annual net operating income of $1.5 million 99,000 shares of stock outstanding, and no debt. X pays federal income taxes of $510,000 ($1.5 million multiplied by 34 percent), resulting in net after-tax income of $990,000 ($1.5 million less $510,000). Earnings per share are $10 ($990,000 divided by 99,000 shares). The stock sells on the market at about $80 per share (or t times earnings).