Question

EPS, P/E Ratio, and Dividend Ratios

The Stockholders' Equity section of the balance sheet for Obregon, Inc. at the end of 2017 appears as follows:

8%, $100 par, cumulative preferred stock, 200,000 shares authorized, 50,000 shares issued and outstanding		$5,000,000
Additional paid-in capital on preferred		2,500,000
Common stock, $5 par, 500,000 shares authorized, 400,000 shares issued and outstanding		2,000,000
Additional paid-in capital on common		18,000,000
Retained earnings		37,500,000
	Total stockholders' equity	$65,000,000

Net income for the year was $1,240,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.55 per share was declared and paid each quarter on the common shares. The closing market price for the common shares on December 31, 2017, was $22.05 per share.

Required:

1. Compute the following ratios for the common stock:

When required, round earnings per share and price/earnings ratio answers to two decimal places. For dividend payout and dividend yield ratios, round raw calculations to 4 decimal places, but enter each answer as a percentage to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86, indicating 17.86%.

a. Earnings per share	$
b. Price/earnings ratio		to 1
c. Dividend payout ratio		%
d. Dividend yield ratio		%

2. Before recommending the stock of Obregon to a client, as a financial adviser, you would like to know:

1. future earnings growth.
2. risk of the stock.
3. general economic trends and how they affect the company.
4. all of these. (Correct Answer)

Answer 1