Question

# Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...

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) \$3,900,000 Preferred \$5 stock, \$100 par (no change during the year) 3,000,000

The net income was \$982,000 and the declared dividends on the common stock were \$65,000 for the current year. The market price of the common stock is \$22.40 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 %

 Common stock outstanding = 3900000/15 = 260000 Preferred stock outstanding = 3000000/100 = 30000 Annual Preferred dividends = 30000*5 = \$150000 Earnings for Common Stockholders = 982000-150000= \$832000 a. Earnings per Share =Earnings for Common Stockholders/Common Stock outstanding Earnings per Share = 832000/260000= \$3.20 b. Price-Earnings Ratio = Market price/Earnings per Share Price-Earnings Ratio = 22.40/3.20 = 7 c. Dividends per Share = Common stock dividends/Common Stock outstanding Dividends per Share = 65000/260000= \$0.25 d. Dividend Yield = Dividends per Share/Market price Dividend Yield = 0.25/22.40= 1.12%