Earnings per Share, Price-Earnings Ratio, Dividend Yield The following informati

Question

Earnings per Share, Price-Earnings Ratio, Dividend Yield

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

Common Stock $10 par value (no change during the year) $4,000,000
Preferred $5 stock, $25 par (no change during the year) 1,250,000

The net income was $1,250,000 and the declared dividends on the common stock were $800,000 for the current year. The market price of the common stock is $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. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest cent.

Use the following Feedback:
a. Divide net income minus preferred dividends by common shares outstanding.
b. Divide common market share price by common earnings per share.
c. Divide common dividends by common shares outstanding.
d. Divide common dividends per share by market price per share



a.) Earning Per share $_____

b.) Price-earning ratio _____

c.) Dividends per Share $_____

d.)Dividend yields _____

Explanation / Answer

a.) Earning Per share= Net income/ no of shares= 1,250,000 /4,000,00= 3.125 b.) Price-earning ratio = 40/3.125= 12.8 c.) Dividends per Share = 800,000 /400000= 2 d.)Dividend yields = 2/40= .05

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