Calculate the earnings per share (average of 429,000 shares outstanding for the

Question

Calculate the earnings per share (average of 429,000 shares outstanding for the year) for 2016. (Round answer to 2 decimal places, e.g. 2.55.)

Calculate the price/earnings ratio (market price of $45 at year-end) for 2016. (Round answer to 2 decimal places, e.g. 2.55.)

Calculate the dividend payout ratio (dividends of $1.04 per common share for the year) for 2016. (Round answer to 2 decimal places, e.g. 2.55%.)

Sandhill Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2015 and 2016 follow.
Sandhill Medical
Comparative Balance Sheet
As of December 31 2016 2015 Assets Current assets   Cash $309,000 $417,400   Accounts receivable, net 1,065,600 776,500   Inventory 731,000 681,100   Other current assets 306,000 247,000 Total current assets 2,411,600 2,122,000 Property, plant, & equipment, net 9,513,370 8,439,210   Total assets $11,924,970 $10,561,210 Liabilities and Stockholders’ Equity Current liabilities $3,154,000 $2,846,000 Long-term debt 3,702,700 3,892,650   Total liabilities 6,856,700 6,738,650 Preferred stock, $5 par value 58,600 58,600 Common stock, $0.25 par value 178,000 103,800 Retained earnings 4,831,670 3,660,160   Total stockholders’ equity 5,068,270 3,822,560   Total liabilities and stockholders’ equity $11,924,970 $10,561,210 Sandhill Medical
Comparative Income Statement and Statement of Retained Earnings
For the Year 2016 2015 Sales revenue (all on account) $10,440,000 $9,613,950 Cost of goods sold 4,879,000 5,298,750   Gross profit 5,561,000 4,315,200 Operating expenses 2,840,200 2,634,200 Net operating income 2,720,800 1,681,000 Interest expense 388,000 308,700 Net income before taxes 2,332,800 1,372,300 Income taxes (30%) 699,840 411,690 Net income $1,632,960 $960,610 Dividends paid   Preferred dividends 29,450 29,450   Common dividends 432,000 449,000   Total dividends paid 461,450 478,450 Net income retained 1,171,510 482,160 Retained earnings, beginning of year 3,660,160 3,178,000 Retained earnings, end of year $4,831,670 $3,660,160

Explanation / Answer

Answer of Part 1:

Earnings Per Share = Net Income / Average shares outstanding
Earnings Per Share = $1,632,960 / 429,000
Earnings Per Share = $3.81

Answer of Part 2:

Price/Earnings Ratio = Market Value per Share / Earnings Per Share
Price/Earnings Ratio = $45 / $3.81
Price/Earnings Ratio = $11.81

Answer of Part 3:

Dividend Payout Ratio = Yearly Dividend per share / Earnings Per Share
Dividend Payout Ratio = $1.04 / $3.81
Dividend Payout Ratio = 0.27%

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