Sardel Company reported net income of $29,975 for 2007. During all of 2007 the company had 1,000 shares of 10%, $100 par, nonconvertible preferred stock outstanding, on which the year’s dividends had been paid.

At the beginning of 2007 the company had 7,000 shares of common stock outstanding. On April 2, 2007 the company issued another 2,000 shares of common stock, so that 9,000 common shares were outstanding at the end of 2007. Common dividends of $17,000 had been paid during 2007. At the end of 2007 the market price per share of common stock was $17.50.

Required

1. Compute the basic earnings per share of Sardel Company for 2007.

2. Compute the price/earnings ratio for 2007.