Question

In: Accounting

The following financial information is available for Longmire Lumber Ltd. as at December 31 (in thousands,...

The following financial information is available for Longmire Lumber Ltd. as at December 31 (in thousands, except for per share amounts):

2021 2020 2019

Profit

 $1,978 $2,131 $2,663

Preferred share dividends (total)

 $73 $43 $30

Weighted average number of common shares

 502 500 501

Dividends per common share

 $2.50 $2.25 $2.10

Market price per common share

 $43.00 $49.75 $56.25


(a)

Calculate the earnings per share, price-earnings ratio, and payout ratio for the common shareholders for each of the three years. (Round earnings per share and payout ratio answers to 2 decimal places, e.g. 52.76. Round price-earnings ratio answers to 1 decimal place, e.g. 52.7.)

2021 2020 2019

Earnings per share

 $enter Earnings per share in dollars rounded to 2 decimal places $enter Earnings per share in dollars rounded to 2 decimal places $enter Earnings per share in dollars rounded to 2 decimal places

Price-earnings ratio

 enter Price-earnings ratio in times rounded to 1 decimal place times enter Price-earnings ratio in times rounded to 1 decimal place times enter Price-earnings ratio in times rounded to 1 decimal place times

Payout ratio

 enter Payout ratio rounded to 2 decimal places enter Payout ratio rounded to 2 decimal places enter Payout ratio rounded to 2 decimal places

Solutions

Expert Solution

2021:

Earnings per share = (Profit - Preferred share dividends) / Weighted average number of common shares
Earnings per share = ($1,978 - $73) / 502
Earnings per share = $3.79

Price-earnings ratio = Market price per common share / Earnings per share
Price-earnings ratio = $43.00 / $3.79
Price-earnings ratio = 11.3

Payout ratio = Dividends per common share / Earnings per share
Payout ratio = $2.50 / $3.79
Payout ratio = 65.96%

2020:

Earnings per share = (Profit - Preferred share dividends) / Weighted average number of common shares
Earnings per share = ($2,131 - $43) / 500
Earnings per share = $4.18

Price-earnings ratio = Market price per common share / Earnings per share
Price-earnings ratio = $49.75 / $4.18
Price-earnings ratio = 11.9

Payout ratio = Dividends per common share / Earnings per share
Payout ratio = $2.25 / $4.18
Payout ratio = 53.83%

2019:

Earnings per share = (Profit - Preferred share dividends) / Weighted average number of common shares
Earnings per share = ($2,663 - $30) / 501
Earnings per share = $5.26

Price-earnings ratio = Market price per common share / Earnings per share
Price-earnings ratio = $56.25 / $5.26
Price-earnings ratio = 10.7

Payout ratio = Dividends per common share / Earnings per share
Payout ratio = $2.10 / $5.26
Payout ratio = 39.92%

ekkarill92 answered 1 year ago
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