Assume you found the following stock quote for DRK Enterprises, Inc., at your fa

Question

Assume you found the following stock quote for DRK Enterprises, Inc., at your favorite Web site. You also found that the stock paid an annual dividend of $.89, which resulted in a dividend yield of 1.6 percent. Assume the company has 92 million shares of stock outstanding and a P/E ratio of 21.

What was net income for the most recent four quarters? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

rev: 03_05_2015_QC_CS-9705

Assume you found the following stock quote for DRK Enterprises, Inc., at your favorite Web site. You also found that the stock paid an annual dividend of $.89, which resulted in a dividend yield of 1.6 percent. Assume the company has 92 million shares of stock outstanding and a P/E ratio of 21.

Explanation / Answer

Solution

The formula to calculate dividend yield is Dividend per share/Stock price

Here, Dividend yield and Dividend per share are given, thus Stock price is calculated as follows:

Dividend per share = $0.89

Dividend yield = 1.6%

Stock price = Dividend per share/Dividend yield = $0.89/1.6% = $55.625

P/E ratio = Stock Price/Earnings per share

Using this formula, we can calculate Earnings per share

Stock Price = $55.625

P/E ratio = 21

Earnings per share = Stock price/Price Earning ratio = $55.625/21 = $2.64881

Another formula to calculate, Earnings per share is as follows:

Earnings per share = Net income/Number of shares of stock outstanding

Thus, Net income = Earnings per share X Number of shares of stock outstanding

Earnings per share = $2.64881

Number of shares of stock outstanding = 92,000,000

Thus, Net income for the most recent four quarters = $2.64881 X 92,000,000 = $243,690,476

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