Question

1. The following information has been extracted from the published accounts of Pesa Corporation Ltd, a quoted company at the NSE.

Net profit after tax and interest                       990,000

Less Dividends for the period                          740,000

Transfer to reserve                                        250,000

Accumulated reserves b/f                               810,000

Reserves c/f                                                  1,060,000

Share capital (Sh10.par Value)                        8,000000

Market price per share                                    12

Required;

1. EPS
2. P/E Ratio
3. Dividend yield                                 

Answer 1

i. EPS (Earning per share)

The earnings per share value are calculated as the net income (net profits) divided by the available shares.

EPS = Net income / common shares outstanding

Common shares outstanding = Share Capital / par value = 8,000,000 / 10 = 800,000

EPS = 990,000 / 800,000 = 1.2375

ii. P/E ratio

The price-to-earnings ratio (P/E ratio) is the ratio that measures its current share price relative to its earning per share (EPS).

P/E ratio = Market value of share / EPS

P/E ratio = 12 / 1.2375 = 9.697

iii. Dividend Yield

Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share.

Dividend yield = Dividend per share / Market price of share

Dividend per share = Total dividend paid / common shares outstanding = 740,000/800,000 = 0.925

Dividend yield = 0.925 / 12 = 0.0771 = 7.71%