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6 December, 22:48

The following information was taken from the financial statements of Fox Resources for December 31 of the current fiscal year: Common stock, $20 par value (no change during the year) $5,000,000 Preferred 10% stock, $40 par (no change during the year) 2,000,000 The net income was $600,000, and the declared dividends on the common stock were $125,000 for the current year. The market price of the common stock is $20 per share. Calculate for the common stock: Round ratios and percentages to one decimal place, and monetary amounts to nearest cent. 1. Earnings per share $ 2. Price-earnings ratio 3. Dividends per share $ 4. Dividend yield %

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  1. 6 December, 23:01
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    Fox Resources

    Units of common stock in issue = $5,000,000 divided $20 = 250,000 units

    A. Earnings per share = Net income (after deducting preferred stock interest) divided by number of outstanding shares in issue

    We assume the Net income provided already has deducted interest on preferred stock

    = 600,000/250,000

    = $2.4

    B. Price Earning Ratio

    = share price divided by the Earnings per share

    = 20/2.4

    = 8.33

    C. Dividend Per share

    = Dividend paid divided by number of common stock issued & outstanding

    = $125,000/250,000

    = $0.50
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