Problem Solving

Last year the price per share of stock X increased by K percent and the earnings per h\share of stock X increased by m percent, where K is greater than m. By what percent did the ratio of price per share to earnings per share increases, in terms of K &m?

Answer: [100(k-m)]/ (100+m)%

Can anyone explain?
Thanx in advance!

likewhoa wrote:Last year the price per share of stock X increased by K percent and the earnings per h\share of stock X increased by m percent, where K is greater than m. By what percent did the ratio of price per share to earnings per share increases, in terms of K &m?

Answer: [100(k-m)]/ (100+m)%

Can anyone explain?
Thanx in advance!

Original Price = P
Increased Price = P + P*(K/100)

Original Earnings = E
Increased Earnings = E + E(M/100)

Increase in P/E ratio = Increased Price / Increased Earnings - Original Price / Original Earnings =

[P + P*(K/100) / E +E(M/100)] - P/E

= k-m / 100+m

For % increase multiply with 100 and you get the ans