Percentage Changes; P/e Ratios and Investors' Expectations
Shown Below Are

Percentage changes; p/e ratios and investors' expectations
Shown below are Gamma, Inc.'s earnings per share for a four-year period, along with the per-share market price of the company's stock at each year-end. The earnings in 2011 were the highest in the company's history.
$$\begin{array} { | l | c | c | c | c | } \hline & 2011 & 2010 & 2009 & 2008 \\\hline \text { Earnings per share } & \$ 9 & \$ 7 & \$ 6 & \$ 7 \\\hline \text { Percentage change } & \% & \% & \% & \% \\\hline \text { Year-end stock price } & \$ 77 & \$ 140 & \$ 84 & \$ 70 \\\hline \text { Price-earnings ratio } & - & - & - & - \\\hline\end{array}$$
(a) Compute the percentage change in earnings per share in 2009, 2010, and 2011. (Place your answers in the spaces provided above.)
(b) Compute the p/e ratio of stock at the end of each of the four years. (Place your answers in the spaces provided above.)
(c) What does the p/e ratio at the end of 2011 indicate about investors' expectations of earnings per share for the coming year? Explain your reasoning.

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(c) The p/e ratio of 8.5 is low by hist...

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