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During 2018, Rundle Corporation reported after-tax net income of $3,580,000. During the year, the number of...

During 2018, Rundle Corporation reported after-tax net income of $3,580,000. During the year, the number of shares of stock outstanding remained constant at 9,920 of $100 par, 8 percent preferred stock and 399,000 shares of common stock. The company’s total stockholders’ equity is $20,000,000 at December 31, 2018. Rundle Corporation’s common stock was selling at $52 per share at the end of its fiscal year. All dividends for the year have been paid, including $4.90 per share to common stockholders. Required Compute the earnings per share. (Round your answer to 2 decimal places.) Compute the book value per share of common stock. (Round your answer to 2 decimal places.) Compute the price-earnings ratio. (Round intermediate calculations and final answer to 2 decimal places.) Compute the dividend yield.

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Answer #1

1) Earnings per share = Earnings available for common stockholders/No. of common stock

Earnings available for Common Stockholders = Net Income after tax - Preferred dividends

Preferred Dividends = (9,920 shares*$100)*8% = $79,360

Earnings available for Common Stockholders = $3,580,000 - $79,360 = $3,500,640

Earnings per share = $3,500,640/399,000 shares = $8.77 per share

2) Common Stockholders Equity = Total Stockholder's Equity - Preferred Stockholder Equity

= $20,000,000 - $992,000 = $19,008,000

Book value per share of common stock = Common Stockholder's Equity/No. of common stock

= $19,008,000/399,000 = $47.64 per share

3) Price Earnings Ratio = Market price per share/Earnings per share

= $52/$47.64 = 1.09

4) Dividend yield = Annual dividend/Market Price per share

= $4.90/$52 = 9.42%

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