Earnings per share and price-earnings ratio

Question

Problem: The following information applies to Ida Construction Company (ICC):

                                                       2007          2006
Net sales                                      $425,000    $300,000
Income before interest and taxes       63,750       42,000
Net income                                       27,625       28,000
Interest expense                               10,625        7,500
Stockholders' equity, December 31    386,750    270,000
Common stock                                375,150     246,600
Preferred stock dividends                $ 12,000    $ 12,000

Information on the number of shares outstanding is provided below:

Average number of common shares outstanding for 2006    38,000
Average number of common shares outstanding for 2007    33,000

Required:

Compute the following ratios for ICC for 2007 and 2006:

(a) Number of times interest is earned;

(b) Earnings per share;

(c) Price-earnings ratio (Market prices: 2007 $8.75 per share, 2006 $7.50 per share);

(d) Return on equity; and

(e) Net margin.