Question

Earnings per Share, Price-Earnings Ratio, Dividend Yield

The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year:

Common stock, $10 par value (no change during the year)	$2,300,000
Preferred $10 stock, $200 par (no change during the year)	6,000,000

The net income was $760,000 and the declared dividends on the common stock were $57,500 for the current year. The market price of the common stock is $14.00 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		%

Answer 1

Answer:

a. Earnings per Share	2.0
b. Price-Earnings Ratio	7	time
c. Dividends per Share	0.25
d. Dividend Yield	1.79%

Working notes for the above answer is as under

1

Earning per share

=Net income- pref. dividend / Number of share Outstanding

=760,000- (10*30,000) / (2,300,000/10)

=460,000/230,000

=$2

Earning per share =$2

2

Price earning per share

= market value per share / earning per share

=14 /2

=7 time

3

Dividend per share

=total declared dividend on common share / Number of share Outstanding

=57500 /230,000

=0.25 dividend per share

4

Dividend yield

= Dividend per share / market value per share

=0.25 /14

=1.79%