Question

The following information was taken from the financial statements of Tolbert Inc. for December 31 of...

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) $2,550,000
Preferred $10 stock, $100 par (no change during the year) 2,000,000

The net income was $438,000 and the declared dividends on the common stock were $42,500 for the current year. The market price of the common stock is $10.50 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 %

Homework Answers

Answer #1

Solution a:

Preferred dividend = $2,000,000*$10/$100 = $200,000

Common shares outstanding = $2,550,000/ $15 = 170,000

Earnings per share = (Net income- preferred dividend) / common shares outstanding

= ($438000- $200000) / 170000 = $1.40

Solution b:

Price earning ratio = Market price / earnings per share = $10.50 / $1.40 = 7.5

Solution c:

Dividends per share = common stock dividend / common shares = $42500/170000 = $0.25

Solution d:

Dividend yield = dividend per share / market price = $0.25 / $10.50 = 2.38%

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