Question

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash				$	23,000
Accounts receivable, net					200,000
Merchandise inventory					400,000
Prepaid expenses					8,000
Total current assets					631,000
Property and equipment, net					850,000
Total assets				$	1,481,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	210,000
Bonds payable, 10%					310,000
Total liabilities					520,000
Stockholders’ equity:
Common stock, $10 par value				$	140,000
Retained earnings					821,000
Total stockholders’ equity					961,000
Total liabilities and equity				$	1,481,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,210,000
Cost of goods sold		1,210,000
Gross margin		1,000,000
Selling and administrative expenses		610,000
Net operating income		390,000
Interest expense		31,000
Net income before taxes		359,000
Income taxes (30%)		107,700
Net income	$	251,300

     Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $280,000. All sales were on account.

Assume that Castile Products, Inc., paid dividends of $2.75 per share during the year. Also assume that the company’s common stock had a market price of $54 at the end of the year and there was no change in the number of outstanding shares of common stock during the year.

Required:

Compute financial ratios as follows:

1.	Earnings per share. (Round your answer to 2 decimal places.)

Earnings per share

$3.45

      

2.	Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your final percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

Dividend payout ratio

32.5

%

       

3.	Dividend yield ratio. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%).)

Dividend yield ratio

2.5

%

  

4.	Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)

Price-earnings ratio

4.2

  

5.	Book value per share. (Round your answer to 2 decimal places.)

Book value per share

$2.34

      

Answer 1

Answer is given below