Question
EPS, P/E Ratio, and Dividend Ratios The Stockholders' Equity section of the balance sheet for Obregon,...
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:
- future earnings growth.
- risk of the stock.
- general economic trends and how they affect the company.
- all of these. (Correct Answer)
Homework Answers
Answer #1
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