genow eBook Basic Earnings per Share Monona Company reported net income of $29,9
ID: 2579317 • Letter: G
Question
genow eBook Basic Earnings per Share Monona Company reported net income of $29,975 for 2016. During all of 2016, Monona had 1,000 shares of 10%, $100 par, nonconvertible preferred stock Calculator outstanding, on which the year's dividends had been paid. At the beginning of 2016, the company had 7,000 shares of common stock outstanding. 16, the company issued another 2,000 shares of common stock so that 9,000 common shares were outstanding at the end of 2016. Common dividends of $17,000 had been paid during 2016. At the end of 2016, the market price per share of common stock was $17.50. Required: 1. Compute Monona's basic earnings per share for 2016. If required, round your answer to two decimal places. per share 2. Compute the price/earnings ratio for 2016. If required, round your answer to one decimal place. times Previous Net Check My Work 1143 AMExplanation / Answer
Ans. 1. Computation of Basic Earning per share for the year of 2016
Net Income before Dividend : $29975
Less: Preference Dividend (1000X100)X.10 $10000
Earning available for equity $19975
Calculation of Weighted Average no of equity share
No of share at begning $7000
Issued in Apr 2016 (2000X9/12) $1500
apr to Dec 2016 only 9 month
total Weighted Average no of share $8500
EPS = Earning available for equity/ total weighted average no of share
= $19975/8500 = $2.35
2. Calculation Price Earning Ratio (P/E Ratio) = Market price of share/EPS
Market price of share = $17.50
EPS = $2.35
P/E Ratio = 17.50/2.35 = 7.45
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