Question

The Amherst Company has a net profits of ​$15 ​million, sales of $178 ​million, and 4.2 million shares of common stock outstanding. The company has total assets of $97 million and total​ stockholders' equity of $38 million. It pays $1.02 per share in common​ dividends, and the stock trades at $21 per share. Given this​ information, determine the​ following:

a. ​Amherst's EPS ​(Round to the nearest​ cent.)

b. ​Amherst's book value per share ​(Round to the nearest​ cent.)

c. ​Amherst's price-to-book-value ratio (Round to two decimal​ places.)

d. The​ firm's P/E ratio ​(Round to one decimal​ place.)

e. The​ company's net profit margin ​(Round to two decimal​ places.)

f. The​ stock's dividend payout ratio ​(Round to two decimal​ places.)

g. he​ stock's dividend yield is ​(Round to two decimal​ places.)

h. The​ stock's PEG​ ratio, given that the​ company's earnings have been growing at an average annual rate of 9.9​% (Round to two decimal​ places.)

i. The​ stock's PEG​ ratio, given that the​ company's earnings have been growing at an average annual rate of 9.9​% ​(Round to two decimal​ places.)

Answer 1

Answer a.

EPS = Net Profits / Number of Common Stock Outstanding
EPS = $15 million / 4.2 million
EPS = $3.57

Answer b.

Book Value per share = Total Stockholders’ Equity / Number of Common Stock Outstanding
Book Value per share = $38 million / 4.2 million
Book Value per share = $9.05

Answer c.

Price-to-Book Value Ratio = Market Price per share / Book Value per share
Price-to-Book Value Ratio = $21.00 / $9.05
Price-to-Book Value Ratio = 2.32

Answer d.

P/E Ratio = Market Price per share / EPS
P/E Ratio = $21.00 / $3.57
P/E Ratio = 5.88

Answer e.

Net Profit Margin = Net Profits / Sales
Net Profit Margin = $15 million / $178 million
Net Profit Margin = 0.0843 or 8.43%

Answer f.

Payout Ratio = Dividends per share / EPS
Payout Ratio = $1.02 / $3.57
Payout Ratio = 0.2857 or 28.57%

Answer g.

Dividend Yield = Dividends per share / Market Price per share
Dividend Yield = $1.02 / $21.00
Dividend Yield = 0.0486 or 4.86%

Answer h.

PEG Ratio = P/E Ratio / Growth Rate
PEG Ratio = 5.88 / 9.9
PEG Ratio = 0.59