Note : The market price of BabyCakes Int’l, Inc. common stock was $20 on Decembe

Question

Note: The market price of BabyCakes Int’l, Inc. common stock was $20 on December 31, 2008.

Part A:Complete the calculations for the 19 items listed below.

Determine the following measures for the year 2008:

Price-earnings ratio

Dividends per share of common stock

Dividend yield

Retained Earnings December 31

$421,000

$375,000

$1,575,000

Baby Cakes International Inc Statement of Retained Earnings for the Years ended December 31, 2008 and 2007 December 31, 2008 December 31, 2007 Retained Earnings, January 1 $375,000 $327,000 Net income for year 68,000 67,000 Total $443,000 $394,000 Dividends Paid          Preferred Stock $15,000 $12,000          Common Stock 7,000 7,000                     Total Dividends Paid $22,000 $19,000

Retained Earnings December 31

$421,000

$375,000

Explanation / Answer

Price Earning ratio is the market price per share to the earnings per share

Market price per share $20

Earning per share = Net income /no.of shares

= 68000/35000

= 1.94

P/E ratio = 20/1.94

= 10.31

Dividend per Share of Common Stock

Dividend for the year = 7000

Common Stock = 35000

Dividend per stock = 7000/35000

= $ 0.2

Dividend Yeild is the dividend per share ,divided by price per share

Dividend per share = 7000/35000

= 0.20

Price per share = $ 20

Dividend yeild = (0.20/20)*100

= 1%

  

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