Financial information for Forever 18 includes the following selected data (in millions):
($ in millions).................................... 2012.............. 2011
Net income....................................... $210.............. $180
Dividends on preferred stock ...................$25............... $20
Shares outstanding (in millions) ................240............... 220
Stock price .....................................$11.52............ $10.47
Required:
1. Calculate earnings per share in 2011 and 2012. Did earnings per share increase in 2012?
2. Calculate the price-earnings ratio in 2011 and 2012. In which year is the stock priced lower in relation to reported earnings?