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22 August, 09:37

Calculate the payout ratio, earnings per share, and return on common stockholders' equity. (Round earning per share to 2 decimal places, e. g. $2.66 and all other answers to 1 decimal place. 17.5%.) Payout ratio % Earnings per share $ Return on common stockholders' equity %

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  1. 22 August, 12:11
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    Payout Ratio 69.9%

    Earning Per Share $0.94

    Return on the Common Stockholder Equity 12.6%

    Explanations:-

    Monty Corp

    1. Calculation for Payout Ratio

    Using this formula

    Payout Ratio = Dividend Declared/Net Income

    Dividend Declared = $0.70 * Shares outstanding

    Shares outstanding:-

    Opening ($837,500/$3) = 279,167

    Issued on Feb 1 5310

    Treasury (4900)

    Purchased Treasury on March 20 (1300)

    Shares outstanding 278,277

    Dividend Declared = 278277 * $0.70

    = $194,793.90

    Net Income = $278600

    Payout Ratio = $194793.90/$278600 = 69.9%

    Therefore Payout Ratio will be 69.9%

    2. Calculation for Earning Per Share

    Using this formula

    Earning Per share = (Net Income - Preference Dividend) / Avg Common Stock shares

    Net Income = $2786,00

    Preference Dividend = $294,000 * 6%

    = $17640

    Average Common Stock shares = (Beginning Shares outstanding + Ending Shares outstanding) / 2

    Beginning Shares outstanding = 279,167 - 4,900 = 274,267

    Ending Shares outstanding = 278,277

    Average = (274,267 + 278,277) / 2 = 276,272

    Earning Per Share = ($278,600 - $17,640) / 276,272 = $0.94

    Therefore Earning per share will be $0.94

    3. Calculation for Return on Common Stockholders Equity

    Using this formula

    Return on Common Stockholder Equity =

    (Net Income - Preference Dividend) / Avg Common Stockholder Equity

    Average Common Stockholder Equity = (Beginning Stockholder Equity + Ending Stockholder Equity) / 2

    Beginning Stockholder Equity will be:

    Beginning common stock $837,500

    Beginning Paid-in Capital in Excess of Stated Value on Common Stock $536,000

    Beginning Retained Earnings $695,000

    Treasury Stock ($39,200)

    Beginning Stockholder Equity $2,029,300

    Ending Stockholder Equity will be:

    Ending common stock ($837,500 + [5,310*$3])

    =$853,430

    Ending Paid-in Capital in Excess of Stated Value on Common Stock ($536,000 + [5,310 * $4]) = $557,240

    Ending Retained Earnings $761,166.10

    Treasury Stock ($39,200 + [1300 * $9])

    = ($50900)

    Beginning Stockholder Equity$2,120,936.10

    Calculation for Ending Retained Earnings

    Using this formula

    Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividend on common & Preferred stock

    = $695, 000 + $278,600 - ($194,793.90 + $17,640)

    = $761,166.10

    Average Common Stockholder Equity = ($2,029,300 + $2,120,936.10) / 2 = $2,075,118.05

    Return on Common Stockholder Equity = ($278,600 - $176,40) / $2,075,118.05

    Return on Common Stockholder Equity = 12.6%

    Therefore the Payout Ratio is 69.9%

    Earning Per Share is $0.94

    Return on Common Stockholder Equity is 12.6%
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