Question

Earnings Per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Monarch Resources Inc. for December 31 of the current year: Common stock, $125 par value (no change during the year) $12,500,000 Preferred $6 stock, $90 par (no change during the year) 2,250,000 The net income was $1,300,000, and the declared dividends on the common stock were $460,000 for the current year. The market price of the common stock is $92 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. Round to one decimal place except earnings per share and dividends per share, which should be rounded to the nearest cent. a. Earnings per share $fill in the blank 1 b. Price-earnings ratio fill in the blank 2 c. Dividends per share $fill in the blank 3 d. Dividend yield fill in the blank 4 %

Answer 1

Answer:

Monarch Resources Inc.

a. Earnings per share:

= $ 11.50

b. Price-earnings ratio:

= 8x

c. Dividends per share:

= $4.60 per share

d. Dividend yield:

= 5%

Explanation:

a) Data and Calculations:

Common stock, $125 par value = $12,500,000

Number of common stock shares = 100,000 ($12,500,000/$125)

$6 Preferred stock, $90 par value = $2,250,000

Number of preferred stock shares = 25,000 ($2,250,000/$90)

Net income = $1,300,000

Dividends on the Preferred stock = $150,000 ($2,250,000/$90 * $6)

Net income after preferred dividend = $1,150,000 ($1,300,000-$150,000)

Dividends on the Common stock = $460,000

Common stock market price = $92 per share

a. Earnings per share

= Net income after preferred dividend/number of shares

= $1,150,000/100,000

= $ 11.50

b. Price-earnings ratio:

= Market price/EPS

= $92/$11.50

= 8x

c. Dividends per share:

= Common stock dividends/number of common stock shares

= $460,000/100,000

= $4.60 per share

d. Dividend yield:

= Market price/Dividend per share

= $4.60/$92 * 100

= 5%