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5 December, 16:06

he following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $50 par value (no change during the year) $11,500,000 Preferred $10 stock, $200 par (no change during the year) 6,000,000 The net income was $714,000 and the declared dividends on the common stock were $57,500 for the current year. The market price of the common stock is $14.40 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. If required, round your answers to two decimal places. a. Earnings per Share $ b. Price-Earnings Ratio c. Dividends per Share $ d. Dividend Yield %

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  1. 5 December, 18:31
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    a. Earnings per Share $

    earnings per share = (net income - preferred dividends) / average outstanding stocks

    net income = $714,000 preferred dividends = ($6,000,000 / $200) x $10 = 30,000 x $10 = $300,000 average outstanding shares = $11,500,000 / $50 = 230,000 shares

    EPS = ($714,000 - $300,000) / 230,000 stocks = $1.80 per share

    b. Price-Earnings Ratio

    P/E ratio = current stock price / EPS

    current stock price = $14.40 EPS = $1.80

    P/E ratio = $14.40 / $1.80 = 8

    c. Dividends per Share $

    DPS = total dividends / total outstanding stocks

    total dividends = $57,500 total outstanding stocks = 230,000

    DPS = $57,500 / 230,000 stocks = $0.25 per stock

    d. Dividend Yield %

    dividend yield = dividend per share / stock price

    DPS = $0.25 stock price = $14.40

    dividend yield = $0.25 / $14.40 = 1.74%
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