Interest on bonds = 4,000,000 x 8%
= $320,000
a.
Interest coverage ratio = ( Income before income tax + Interest expense )/Interest expense
= (960,000+320,000)/320,000
= 1,280,000/320,000
= 4 times
b.
Number of common shares = 2,000,000/10
= 200,000
Net income = Income before tax - Income tax expense
= 960,000-288,000
= $672,000
Earning per share = ( Net income- Preferred dividend)/Number of common shares
= (672,000-60,000)/200,000
= 612,000/200,000
= $3.06
c.
Price earning ratio = Market price of 1 common share / Earning per share
= 45/3.06
= 14.71 times
d.
Dividend per common share = total dividend on common stock / Number of common share
= 300,000/200,000
= $1.5
Dividend yield = Dividend per common share/Market price per common share
= 1.50/45
= 3.33%
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