Question

Earnings per Share, Price-Earnings Ratio, Dividend Yield

The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:

Common stock, $15 par value (no change during the year)	$4,650,000
Preferred $8 stock, $200 par (no change during the year)	8,000,000

The net income was $878,000 and the declared dividends on the common stock were $77,500 for the current year. The market price of the common stock is $14.40 per share.

For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. If required, round your answers to two decimal places.

a. Earnings per Share	$
b. Price-Earnings Ratio
c. Dividends per Share	$
d. Dividend Yield		%

Answer 1

Answer:

Preferred Dividends = $ 8,000,000 / $200 x $8   =   $320,000 weighted-average common shares outstanding = $4,650,000 / $15 =   310,000 Shares

a)

Earnings Per share = Net Income (-) preferred Dividends / weighted-average common shares outstanding                                         =    ( $878,000 (-) $320,000 )/ 310,000 Shares                                         =     $ 1.80 per share

b)

Price earning ratio      = Market value per share / Earnings Per share                                             =      $14.40 / $ 1.80 per share                                             =     8

c)

Dividends per Share     =    Dividends paid / weighted-average common shares outstanding                                               =     $77,500 / 310,000 Shares                                               =     $0.25 per Share

d)

Dividend Yield    = Dividends per Share   /    Market value per share                                   =   $0.25 / $14.40                                   = 1.74%