The following information pertains to Parsons Co.: Compute (assume no changes in

Question

The following information pertains to Parsons Co.:

Compute (assume no changes in balances during the past year): (Round per share and ratios to 2 decimal places, e.g. $15.25 or 15.25%.)

Preferred stock, cumulative:     Par value per share $100     Dividend rate 8%     Shares outstanding 11,000     Dividends in arrears none Common stock:     Par value per share $10     Shares issued 130,000     Dividends paid per share $2.10     Market price per share $48.00 Additional paid-in capital $520,000 Unappropriated retained earnings (after closing) $280,000 Retained earnings appropriated for contingencies $300,000 Common treasury stock:     Number of shares 11,000     Total cost $250,000 Net income $639,000

Explanation / Answer

(a) Share Holders Equity

= (11000 x 100) + (130000 x 10) + 520000 + 280000 + 300000 – 250000

= $ 32,50,000

(b)Earnings per share of common stock

          = [ 639000 – ( 11000 x 100 x 8% ) ] / (130000-11000)

          = $ 551000 / 119000 shares

          = $ 4.63 / Share

(c) Book value per share of common stock

          =       [ $ 32,50,000 – $ 11,00,000 ] / (130000-11000)

          =       $ 16.67 / Share

(d) Payout ratio of common stock

          =       $ 2.10 / $ 4.63 *100

          =       45.36 %

(e) Return on Common stock Equity

          = $ 551000 / [ $ 32,50,000 - $ 11,00,000 ] * 100

          = [ $ 551000 / $ 21,50,000 ] * 100

          = 25.63 %

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