Aero Company’s earnings per share can be calculated by dividing the net earnings by the number of shares outstanding. By dividing the company’s net earnings of $3000000 by 1000000 outstanding shares, we get a earnings per share value of 3.
We can calculate the Company’s P/E Ratio or Price to earnings ratio by dividing the price per share by the Earnings Per Share (EPS).
With share price of $20 and an EPS of 3, we get Aero Company’s P/E Ratio of 6.67.
How many shares will have to be sold to net the $4,000,000 that Aero needs
In order to raise the $4,000,000 that Aero Company needs, given the information, the company’s investment banker needs to sell 210799.6 or 210,800 shares of stock at the price $18 plus 7% of $19.26 per share.References
Wikipedia. (2007, February 7). P/E ratio. Retrieved February 20, 2007, from http://en.wikipedia.org: http://en.wikipedia.org/wiki/P/E_ratio.