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 Finn Resources Inc. for December 31 of the current fiscal year:

The net income was $548,000 and the declared dividends on the common stock were $90,000 for the current year. The market price of the common stock is $20.8 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. If required, round your answers to two decimal places.

Common stock, $50 par value (no change during the year) $9,000,000 Preferred $4 stock, $200 par (no change during the year) 4,000,000

Explanation / Answer

Common Shareholding   $ 9000,000 Common Stock   $ 50 par value Number of common share (9000,000 /50) 180,000 shares Preferred $ 200 par      $ 4000,000 Number of preferred share (4000,000 /200 ) = 20,000 preferred shares Preferred dividend per share   $ 4 per share Annual Preferred dividend (20,000*4)   $ 80,000 Net Income                $ 548,000 Less: Pref Dividend $ 80,000 Net Income for common Shareholders $ 468,000 Earning per share = Net Income for common shareholders / Number of common shares ( 468,000 / 180,000) = $ 2.60 per share Market price per share $20.80 per share Price earning ratio = Market price per share / Earning per share ( 20.80 / 2.60 ) = 8 times Dividend declared   $90,000 Dividend per share = Total dividend / number of common shares ( 90,000 /180,000 ) = $ 0.50 per share Dividend Yield ratio = Dividend / Market price per share *100 ( 0.50 /20.80 ) *100 = 2.40% Earning per share $ 2.60 per share Price earning ratio 8 times Dividend per share' $ 0.50 per share Dividend Yield ratio 2.40%

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