P13-46B Computing carniogs pex share, p siedns Cornpan spiied hesso 206. income

Question

P13-46B

Computing carniogs pex share, p siedns Cornpan spiied hesso 206. income Statemens-patial 2015 oe Asec Capsta seck_-5%, $4 Par Value, 75,000 sms horord, 10,000 shares issued and cutsledne Cotmon Stock-$2 Par Value, 65,000 shares s 4a000 4000 suthonzed 50,000 shanes issued and outstending 100,000 4,000 75,000 Paixd- n Capital in Excess of Par-Common 100.00 14000 46.000 Retained Eamings ar Stockholders Equity Requirements L. Compute Medina Company's earnings per shate for 2016. Assume the company uid the minimum preferred dividend during 2016. marker price per share of common stock is $7 2016 Assume the company paid the minimum prefened dividend daring 2016. I Gempure Medina Company's price/carnings ratio for 2016, Assume the company 3. Compute Medina Company's rate of return on common stockholders' equity for ontinuing Problem 4? Sources of equity and journalizing stock issuance Tha problen continues the Danicls Consuling sinuation from Problem P12-39 situation from yter 12, Daniels decides to raise additional capital for a planned business

Explanation / Answer

1.

Earnings per share =(Net income Preference dividends)/Average number of common shares outstanding

= (27000 - 2000) / 50000

= 0.5 per share

Note : 2000 = 5%*40000

2.

Price/earnings ratio = Market price per share of common stock / Earnings per share

= 7 / 0.5

= 14:1

3.

Rate of return on common stockholders’ equity = (Net income Preference dividends) / Average common stockholders’equity

= (27000 - 2000) / (172500)

= 14.49%

NOTE : 172500 = [(100000 + 14000 + 71000) + (100000 + 14000 + 46000)]/2

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