Question

Consider the following information about Earl Grey, Inc.

• Total assets $250 million
• Total debt $110 million
• Preferred stock $ 35 million
• Common stockholders' equity $105 million
• Net profits after taxes $25.5 million
• Number of preferred stock outstanding 1.5 million shares
• Number of common stock outstanding 9 million shares
• Preferred dividends paid $2.5 per share
• Common dividends paid $0.70 per share
• Market price of the preferred stock $32.55 per share
• Market price of the common stock $26.00 per share

Use the information above to find the following.

1. The company's book value
2. Its book value per share
3. The stock's earnings per share (EPS)
4. The dividend payout ratio
5. The dividend yield on the common stock
6. The dividend yield on the preferred stock

Directions:

1. You will report the ratios and your analysis in a Word document.
2. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio.
3. All six ratios should be discussed.

Answer 1

1. The Company's Book Value - 140 Million

Total Assets - 250 Million

Less - Total Debt - 110 Million

Net Assets - 140 Million

2. Book Value Per preference share - 23.33

Preference shares paid Value - 35 Million

No. of shares preference shares outstanding - 1.5 million

Value per share - 23.33 (35/1.5)

Book Value per common stock - 11.66

Total book value - 140 million

Less - Preference share book value - 35 million

Book value of common stock - 105 million (140-35)

No. of Common Stock - 9 million

Value per share - 11.66 (105/9)

3. Earning per share - 2.4166

Net profit after taxes - 25.50 million

Less preference dividend - 3.75 millions (1.50*2.5)

Earnings for equity - 21.75

EPS - 2.4166 (21.75/9)

4. Dividend payout ratio - 39.41%

Dividend paid to preference shareholders - 3.75 million

Dividend paid to equity shareholders - 6.30 millions (9*0.70)

Total dividends paid - 10.05 millions

Total earnings - 25.50 millions

Payout ratio - 39.41% (10.05/25.50*100)