Question

The Amherst Company has a net profits of ​$12 ​million, sales of ​$174 ​million, and 2.9 million shares of common stock outstanding. The company has total assets of ​$92 million and total​ stockholders' equity of ​$37 million. It pays ​$1.49 per share in common​ dividends, and the stock trades at ​$26 per share. Given this​ information, determine the​ following:

a. ​Amherst's EPS.

b. ​Amherst's book value per share and​ price-to-book-value ratio.

c. The​ firm's P/E ratio.

d. The​ company's net profit margin.

e. The​ stock's dividend payout ratio and its dividend yield.

f. The​ stock's PEG​ ratio, given that the​ company's earnings have been growing at an average annual rate of 8.4​%.

1. ​Amherst's EPS is $
2. Amherst's book value per share is $

Amherst's price-to-book-value ratio is $

3. The​ firm's P/E ratio is
4. The​ company's net profit margin is %
5. The​ stock's dividend payout ratio is %

The​ stock's dividend yield is %

6. The​ stock's PEG​ ratio, given that the​ company's earnings have been growing at an average annual rate of 8.48.4​% is

Answer 1

Answer to Part a.

Earnings per Share (EPS) = Net Income / Shares Outstanding
Earnings per Share (EPS) = $12,000,000 / 2,900,000
Earnings per Share (EPS) = $4.14

Answer to Part b.

Book Value per Share = Total Stockholders’ Equity / Shares Outstanding
Book Value per Share = $37,000,000 / 2,900,000
Book Value per Share = $12.76

Price-to-book value ratio = Price per Share/ Book Value per share
Price-to-book value ratio = $26/ $12.76
Price-to-book value ratio = 2.04 times

Answer to Part c.

P/E Ratio = Price per Share / Earnings per Share
P/E Ratio = $26 / $4.14
P/E Ratio = 6.28 times

Answer to Part d.

Net Profit Margin = Net Profit / Sales * 100
Net Profit Margin = $12,000,000 / $174,000,000 * 100
Net Profit Margin = 6.90%

Answer to Part e.

Dividend Payout Ratio = Dividend Paid / Earnings per Share* 100
Dividend Payout Ratio = $1.49 / $4.14 * 100
Dividend Payout Ratio = 35.99%

Dividend Yield = Dividend / Current Price * 100
Dividend Yield = $1.49 / $26 * 100
Dividend Yield = 5.73%

Answer to Part f.

PEG Ratio = P/ E Ratio / Growth rate
PEG Ratio = 6.28 / 8.4
PEG Ratio = 0.75