Question

A small company is started up that makes yarn. The company sells a total of 2,000  shares...

A small company is started up that makes yarn. The company sells a total of 2,000  shares at $50

each to raise money to start the business. At the end of the​ year, the company makes ​$9000 in profits and pays out 3,000

in dividends. Complete parts​ (a) through​ (f) below.

​(a) What is the market capitalization of the​ company?

The market capitalization is

​(Simplify your answer. Do not include the​ $ symbol in your​ answer.)

​(b) What is the share​ price?

The share price.

​(Simplify your answer. Do not include the​ $ symbol in your​ answer.)

​(c) What is the earnings per​ share?

The earnings per share is

​$30003000.

​(Simplify your answer. Do not include the​ $ symbol in your answer. Round to two decimal places as​ needed.)

​(d) What is the PE​ ratio?

The PE ratio is

nothing.

​(Simplify your answer. Round to three decimal places as​ needed.)

​(e) What is the dividend in dollars per​ share?

The dividend per share is

​$30003000

​(Simplify your answer. Do not include the​ $ symbol in your answer. Round to two decimal places as​ needed.)

​(f) What is the dividend as a percentage of the share​ price?

The dividend per share is

nothing​%

of the share price.

​(Simplify your answer. Round to one decimal place as​ needed.)

Enter your answer in each of the answer boxes.

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Homework Answers

Answer #1

A) Market capitalization of company = 2000 shares * $50

= $ 100000

B) The share price is $50 each (assuming the company is not listed on stock exchange).

C) Earning per share = Profit/ No of shares

= 9000/2000

= $4.5

D) PE ratio = Price/ Earning per share

= 50/4.5

= 11.111

E) Dividend per share = Total Dividend/ No of shares

=$3000/ 2000 shares

= $ 1.5

F) Dividend Percentage to share price = (Dividend per share/ Value of share)*100

= ($1.5/50)*100

= 3%

All the above answers are given assuming that issue price is equal to market price of share.

Hope this meets your purpose. Please feel free in case of any concern. Do like if it was help as it motivates us alot.

Thanks

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