Question

Financial statement of McPre Ltd. at the end of financial year 2018-2019 has the following information:-

Sales of $955000 cost of goods sold of $642000 selling expenses of $12000 administrative expenses of $6000, depreciation expenses of $45000 interest expenses of $13,000 and corporate tax rate of 30%.

A) Calculate the gross profit and operating profit (EBIT) of the company.

B) Identify tax payment and not profit of the company.

C) If the current outstanding ordinary shares of the company is 60,000 selling for $12. Each compute the PE ratio of the McPre.

D) Determine the dividend amount if the any can be paid out to shareholders by applying the residual theory.

E) Calculate the dividend payout Ratio.

( gave answer with formula and without excel calculation)

Answer 1

all detailed calculations given below answers.

A.Gross profit = $ 313,000; EBIT = $250,000;

B.Tax payment = $71,100

C. PE ratio of the McPre. = 1.225

D. Dividend / share if we consider all net profit will be distributed = $2.98 per share can be paid out to shareholders.

STEPS	Desc / Year	2018-19
A	Sales	955,000
B	CoGs	642,000
C	Gross profit [A-B]	313,000
D	Selling expense	12,000
E	admin expense	6,000
F	EBITDA [C-D-E]	295,000
G	Depreciation	45,000
H	Operating Profit /EBIT [F-G]	250,000
I	Interest	13,000
J	Profit Before Tax (PBT) [H-I]	237,000
K	Tax (30%)	71,100
L	Profit After Tax (PAT), Net Profit [J-K]	178,900
M	No of shares outstanding	60,000
N	Earnings per share [L/M]	2.98
PE ratio =	Market value per share
	Earnings per share
PE ratio =	12
	2.98
PE ratio =	1.225

Dividend/share =	PAT
	No of outstanding shares
Dividend/share =	178,900
	60,000
Dividend/share =	2.98

Only 4 sub-parts ought to be answered in a question as per guidelines.