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)	$2,400,000
Preferred $10 stock, $200 par (no change during the year)	4,000,000

The net income was $712,000 and the declared dividends on the common stock were $40,000 for the current year. The market price of the common stock is $24.00 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

Earning Per share = Net income / Average number of shares outstanding

Earning Per share = $712,000 / ($2,400,000/$15)

Earning Per share = $4.45

Price Earning Ratio = Market Value per Share / Earnings per Share

Price Earning Ratio = $24 / $4.45

Price Earning Ratio = 5.39

Dividend per share = Total dividends / Number of shares outstanding

Dividend per share = $40,000 / ($2,400,000/$15)

Dividend per share = $0.25

Dividend Yield Ratio = Dividend per share/current share price

Dividend Yield Ratio = $0.25 / $24

Dividend Yield Ratio = 1.04%

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