Question

3. Coin Flip Co. has total assets of $8 million, total short- and long-term debt of $4.8 million, and $650,000 worth of 9% preferred stock outstanding. What is the firm’s total book value? What would its book value per share be if the firm had 50,000 shares of common stock outstanding?

4. Ben’s Burgers is trading at $23 per share. There are 390 million shares outstanding. What is the market capitalization of this company?

5. The MedTech Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million per year.

1. Compute the firm’s earnings per share (EPS).

2. Assuming that the stock currently trades at $60 per share, determine what the firm’s dividend yield would be if it paid $2 per share to common stockholders.

3. What would the firm’s dividend payout ratio be if it paid $2 per share in dividends?

PLEASE ANSWER THE 3 QUESTIONS

Answer 1

Answer 1: Coin Flip Co.

Total book value = Assets – Liabilities – Preferred Stock = 8 - 4.8 - 0.65 = $ 2.55 million

Book value per share = Total Book value - common stock outstanding = 2,550,000 / 50,000 = $50 per share

Answer 2: Ben's Berger

(Market capitalization) = (Price per share) x (Number of shares) = 23 x 390,000,000 = $ 8.97 Billion

Answer 3: MedTech Company

EPS = (after tax income – preferred stock dividend) / shares Outstanding = (15.8 – 1) / 2.5 = $5.92 per share

Dividend yield = dividend / price = 2 / 60 = 3.3%

Dividend Payout ratio = Dividend Per Share / earning Per Share = 2 / 5.92 = 33.78%