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he following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $50 par value (no change during the year) $11,500,000 Preferred $10 stock, $200 par (no change during the year) 6,000,000 The net income was $714,000 and the declared dividends on the common stock were $57,500 for the current year. The market price of the common stock is $14.40 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 %

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Answer:

a. Earnings per Share $

earnings per share = (net income - preferred dividends) / average outstanding stocks

  • net income = $714,000
  • preferred dividends = ($6,000,000 / $200) x $10 = 30,000 x $10 = $300,000
  • average outstanding shares = $11,500,000 / $50 = 230,000 shares

EPS = ($714,000 - $300,000) / 230,000 stocks = $1.80 per share

b. Price-Earnings Ratio

P/E ratio = current stock price / EPS

  • current stock price = $14.40
  • EPS = $1.80

P/E ratio = $14.40 / $1.80 = 8

c. Dividends per Share $

DPS = total dividends / total outstanding stocks

  • total dividends = $57,500
  • total outstanding stocks = 230,000

DPS = $57,500 / 230,000 stocks = $0.25 per stock

d. Dividend Yield %

dividend yield = dividend per share / stock price

  • DPS = $0.25
  • stock price = $14.40

dividend yield = $0.25 / $14.40 = 1.74%

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