The Morton Company recently reported net profits after taxes of $14.2 million. I

Question

The Morton Company recently reported net profits after taxes of $14.2 million. It has 4.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company's stock currently trades at $71 per share.

A) Compute the stock's earnings per share (EPS). Round the answer to two decimal places.
$_______ per share

B) What's the stock's P/E ratio? Round the answer to two decimal places.
$_________ times

C) Determine what the stock's dividend yield would be if it paid $4.62 per share to common stockholders. Round the answer to two decimal places.

____________%

Explanation / Answer

A) Computation of stock's earnings per share (EPS)

EPS = Earnings available to common stock holders / Number of shares of common stock outstanding

B) What's the stock's P/E ratio

PE Ratio = Market price per share / Earnings per share.

= 71 / 2.93

= 24.23

C) Determine what the stock's dividend yield

Dividend yield = Annual Dividend per share / Price per share

= 4.62/71

= .0651

= 6.51%

$ in millions PAT               14.20 Less: Preferred Dividend                  1.00 Earnings available to common stock holders               13.20 Shares Outstanding                  4.50 EPS                  2.93

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