Question

Selected financial information about Backpacking Resources, Inc., is as follows:

Total assets	$20,000,000
Total liabilities	$12,000,000
Total preferred stock	$2,500,000
Total annual preferred stock dividends	$225,000
Net profits after tax	$500,000
Number of shares of common stock outstanding	300,000 shares
Current market price of common stock	$57.00 a share
Annual common stock dividends	$1.71 a share

Using the company's financial information, compute the following:

A) Dividend yield. Round the answer to two decimal places.
___________%

B) Book value per share. Round your answer to the nearest cent.
$___________ per share

c) Earnings per share. Round your answer to the nearest cent.
$________ per share

d) P/E ratio. Round the answer to two decimal places.
___________ times

Answer 1

1. Dividend Yield = Dividend /Market Price Per share = 1.71/57 = 3%

2. Book Value = Total assets - Total liabilities - preferred stock = 20,000,000 - 12,000,000 - 2,500,000 = 5,500,000
No of shares = 300,000
Book value per share = 5,500,000/300,000 = 18.33

3. Earnings per share = (Profit after Tax - Prefrred Stock Dividend)/No of Share = (500,000-225,000)/300,000 = 1.25

4. Price/Earning ratio = Price Per share/Earnings Per share = 57/(1.25) = 45.6

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