Question

Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $330,000. All sales were on account. Assume that Castile Products, Inc., paid dividends of $3.65 per share during the year. Also assume that the company’s common stock had a market price of $61 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash				$	20,000
Accounts receivable, net					210,000
Merchandise inventory					390,000
Prepaid expenses					10,000
Total current assets					630,000
Property and equipment, net					850,000
Total assets				$	1,480,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	290,000
Bonds payable, 11%					400,000
Total liabilities					690,000
Stockholders’ equity:
Common stock, $10 par value				$	110,000
Retained earnings					680,000
Total stockholders’ equity					790,000
Total liabilities and equity				$	1,480,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,200,000
Cost of goods sold		1,250,000
Gross margin		950,000
Selling and administrative expenses		620,000
Net operating income		330,000
Interest expense		44,000
Net income before taxes		286,000
Income taxes (30%)		85,800
Net income	$	200,200

1.

Earnings per share. (Round your answer to 2 decimal places.)

      

2.	Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

       

3.	Dividend yield ratio. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

       

4.	Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

       

5.	Book value per share.

Answer 1

1) Compute earnings per share

Earnings per share = NET income/no of common shares outstanding

= $200200/11000

= $18.2 per share

2) Compute dividend payout ratio

Dividend payout ratio = dividend paid per share/earning per share

= $3.65/$18.2

=20.05%

3) Compute dividend yield ratio

dividend yield ratio = dividend paid per share/market price per share

= $3.65/$61

= 5.98%

4) Compute price earnings ratio

price earnings ratio= market price per share/earnings per share

=$61/$18.2 = 3.35

5) Compute book value per share

Book value per share = total stock equity/no of common shares outstanding

= $790000/11000 = $71.81 per share

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