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Calculate the payout ratio, earnings per share, and return on common stockholders’ equity. (Round earning per share to 2 decimal places, e.g. $2.66 and all other answers to 1 decimal place. 17.5%.) Payout ratio % Earnings per share $ Return on common stockholders’ equity %

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Answer:

Payout Ratio 69.9%

Earning Per Share $0.94

Return on the Common Stockholder Equity 12.6%

Explanations:-

Monty Corp

1. Calculation for Payout Ratio

Using this formula

Payout Ratio = Dividend Declared/Net Income

Dividend Declared = $0.70 * Shares outstanding

Shares outstanding:-

Opening ($837,500/$3) =279,167

Issued on Feb 1 5310

Treasury (4900)

Purchased Treasury on March 20 (1300)

Shares outstanding 278,277

Dividend Declared = 278277 * $0.70

= $194,793.90

Net Income = $278600

Payout Ratio = $194793.90/$278600 = 69.9%

Therefore Payout Ratio will be 69.9%

2. Calculation for Earning Per Share

Using this formula

Earning Per share =(Net Income – Preference Dividend)/Avg Common Stock shares

Net Income = $2786,00

Preference Dividend = $294,000 * 6%

= $17640

Average Common Stock shares = (Beginning Shares outstanding + Ending Shares outstanding)/2

Beginning Shares outstanding = 279,167 – 4,900 = 274,267

Ending Shares outstanding = 278,277

Average = (274,267 + 278,277)/2 = 276,272

Earning Per Share= ($278,600 - $17,640)/276,272 = $0.94

Therefore Earning per share will be $0.94

3. Calculation for Return on Common Stockholders Equity

Using this formula

Return on Common Stockholder Equity =

(Net Income – Preference Dividend)/Avg Common Stockholder Equity

Average Common Stockholder Equity = (Beginning Stockholder Equity + Ending Stockholder Equity)/2

Beginning Stockholder Equity will be:

Beginning common stock $837,500

Beginning Paid-in Capital in Excess of Stated Value on Common Stock $536,000

Beginning Retained Earnings $695,000

Treasury Stock($39,200)

Beginning Stockholder Equity $2,029,300

Ending Stockholder Equity will be:

Ending common stock ($837,500 + [5,310*$3])

=$853,430

Ending Paid-in Capital in Excess of Stated Value on Common Stock ($536,000 + [5,310 * $4]) =$557,240

Ending Retained Earnings $761,166.10

Treasury Stock ($39,200 + [1300 * $9])

=($50900)

Beginning Stockholder Equity$2,120,936.10

Calculation for Ending Retained Earnings

Using this formula

Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividend on common & Preferred stock

= $695, 000 + $278,600 – ($194,793.90 + $17,640)

= $761,166.10

Average Common Stockholder Equity = ($2,029,300 + $2,120,936.10)/2 = $2,075,118.05

Return on Common Stockholder Equity = ($278,600 - $176,40)/$2,075,118.05

Return on Common Stockholder Equity = 12.6%

Therefore the Payout Ratio is 69.9%

Earning Per Share is $0.94

Return on Common Stockholder Equity is 12.6%

Answer 1:

                                The Calculation for Payout Ratio  

Formula :

Payout Ratio = Dividend Declared/Net Income

Dividend Declared = $0.70 * Shares outstanding

  • Shares outstanding :

Opening shares  (837,500/3)$ = $279,167

Issued on Feb= $1 5310

  • Treasury=4900

Purchased Treasury on March 20=1300

  • Shares outstanding=$278,277

Dividend Declared = 278277 * $0.70 = $194,793.90

Net Income = $278600

Payout Ratio = $194793.90/$278600 = 69.9%

Thus, Payout Ratio will be 69.9%

Answer 2:

                        The Calculation for Earning Per Share

Formula :

Earnings Per Share (EPS) = (Net Income – Preference Dividend)/Avg Common Stock shares

Net Income = $2786,00  

  • Preference Dividend = $294,000 * 6% = $17640

Average Common Stock shares = (Beginning Shares outstanding + Ending Shares outstanding)/2

  • Beginning Shares outstanding = 279,167 – 4,900 = 274,267
  • Ending Shares outstanding = 278,277

Average = (274,267 + 278,277)/2 = 276,272

Earning Per Share= ($278,600 - $17,640)/276,272 = $0.94

Thus, Earning per share is $0.94

Answer 3:

                Calculation for Return on Common Stockholders Equity

Formula:

Return on Common Stockholder Equity =  (Net Income – Preference Dividend)/Avg Common Stockholder Equity

Average Common Stockholder Equity = (Beginning Stockholder Equity + Ending Stockholder Equity)/2

  • Beginning Stockholder Equity :

Beginning common stock= $837,500

Beginning Paid-in Capital in Excess of Stated Value on Common Stock =$536,000

Beginning Retained Earnings =$695,000

  • Treasury Stock=$39,200

Beginning Stockholder Equity= $2,029,300

  • Ending Stockholder Equity will be:

Ending common stock= ($837,500 + [5,310*$3])  =$853,430

Ending Paid-in Capital in Excess of Stated Value on Common Stock =($536,000 + [5,310 * $4]) =$557,240

Ending Retained Earnings =$761,166.10

Treasury Stock= $39,200 + [1300 * $9] =($50900)

Beginning Stockholder Equity=$2,120,936.10

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