Comparative financial statements for Weller Corporation, a merchandising company

Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 960,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company’s common stock at the end of the year was $26. All of the company’s sales are on account.

Earnings per share. (Round your answer to 2 decimal places.)

Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

A.Dividend payout ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

Dividend yield ratio. (Round your intermediate calculations and final answer to 2 decimal places.)

Book value per share. (Round your answer to 2 decimal places.)

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 960,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 12%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the company’s common stock at the end of the year was $26. All of the company’s sales are on account.

Explanation / Answer

a) Earning per share = Net income/share outstanding

                              = 6330000/960000

Earning per share = 6.59 per share

b) Price earning ratio = MPS/EPS

                               = 26/6.59

Price earning ratio = 3.95

c) Dividend payout ratio = DPS*100/EPS

                                   = 0.40*100/6.59

Dividend payout ratio = 6.07%

d) dividend yield ratio = DPS*100/MPS

                                = 0.40*100/26

Dividend yield ratio = 1.54%

e) Book value per share = Shareholder's equity/share outstanding

                                    = 40166/960

Book value per share = 41.84 per share

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