Question

12.

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)	$3,750,000
Preferred $10 stock, $200 par (no change during the year)	6,000,000

The net income was $1,050,000 and the declared dividends on the common stock were $62,500 for the current year. The market price of the common stock is $24.00 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		%

Answer 1

preferred dividends	(preferred stock / par value) * stock value
	(6000000 / 200) * 10
total preferred dividends	300000
earnings per share	(net income - preferred dividends)/shares outstanding
net income	1050000
preferred dividends	300000
no.of common shares outstanding	250000
earnings per share ($)	3
price-earnings ratio	market price per share / earnings per share
market price per share	24
earnings price per share	3
price-earnings ratio	8
dividends per share	total common dividends paid / no.of shares outstanding
total common dividends paid	62500
no.of common shares outstanding	250000
dividends per share ($)	0.25
dividend yield	annual dividend per share / market price per share
dividends per share	0.25
market price per share	24
dividend yield	1.04%