Question

Today the common stock of Gresham Technology closed at $26.60 per​ share, down $0.40 from yesterday....

Today the common stock of Gresham Technology closed at $26.60 per​ share, down $0.40 from yesterday. If the company has 4.9 million shares outstanding and annual earnings of $13.2 ​million, what is its​ P/E ratio​ today? What was its​ P/E ratio​ yesterday?

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Answer #1

Part 1:
Share price today=$26.6
Annual earnings=$13.2 million
Number of shares outstanding=4.9 million
Annual earnings per share=Annual earnings/Number of shares outstanding=$13.2/4.9=$2.693877551
Price to earnings (P/E) ratio​ today=Share price today/Annual earnings per share
=$26.6/$2.693877551=9.874242424 or 9.87 (Rounded up to two decimal places)

Part 2:
Given that, the share price today (that is $26.60) is down by $0.40 from yesterday's price.
So, share price yesterday=$26.60+$0.40=$27
Annual earnings=$13.2 million
Number of shares outstanding=4.9 million
Annual earnings per share=Annual earnings/Number of shares outstanding=$13.2/4.9=$2.693877551
Price to earnings (P/E) ratio​ yesterday=Share price yesterday/Annual earnings per share
=$27/$2.693877551=10.02272727 or 10.02 (Rounded up to two decimal places)

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