Question

I DONT HAVE ANY EXTRA INFORMATION!! THIS IS ALL THE HOMEWORK GIVES ME

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

Common stock, $25 par value (no change during the year)	$7,250,000
Preferred $8 stock, $200 par (no change during the year)	8,000,000

The net income was $1,190,000 and the declared dividends on the common stock were $72,500 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

Average number of common shares outstanding = Common stock, par value/Par value per common share

= 7,250,000/25

= 290,000

Number of preferred shares outstanding = Total par value of preferred stock/Par value of 1 preferred stock

= 8,000,000/200

= 40,000

Preferred stock dividend = Number of preferred shares outstanding x Dividend per preferred share

= 40,000 x 8

= $320,000

a)

Earnings per share = (Net income – Preferred stock dividend)/Average number of common shares outstanding

= (1,190,000 - 320,000)/290,000

= 870,000/290,000

= $3

b)

Price earnings ratio = Market price of 1 common share/Earnings per share

= 24/3

= 8

c)

Dividend per share = Cash dividend declared on common stock/Average number of common shares outstanding

= 72,500/290,000

= $0.25

d)

Dividend yield = Dividend per share/Market price per share

= 0.25/24

= 1.04%