I was able to calculate the first half but can\'t seem to calculate the second p

Question

I was able to calculate the first half but can't seem to calculate the second part. thanks for the assist!

River Cruises is all-equity financed with 100,000 shares. It now proposes to issue $190,000 of debt at an interest rate of 10% and use the proceeds to repurchase 19,000 shares at $10 per share. Profts before imterest are expected to be $13.000 a. What is the ratio of price to expected earnings for River Cruses before it borrows the $190,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Price earrings rat o 8.40 b. What ts the ratio after it borrows? (Do not round intermediate colculations Round your answer to 2 decimai places) 3 Answer is complete but not entirely correct. Price-eamings ratio 324 3

Explanation / Answer

b. With debt:

Expected earnings per share = Net profits / Number of shares

= [$119,000 – (0.10 × $190,000)] / (100,000 – 19,000)

= $1.235

P/E ratio = Price per share / Earnings per share

= $10 / 1.235

= 8.10

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