Please Help The Stockholders\' Equity section of the balance sheet for Obregon,
ID: 2741277 • Letter: P
Question
Please Help
The Stockholders' Equity section of the balance sheet for Obregon, Inc. at the end of 2014 appears as follows:
8%, $100 par, cumulative preferred stock, 200,000 shares authorized, 50,000 shares issued and outstanding $5,000,000
Additional paid-in capital on preferred $2,500,000
Common stock, $5 par, 500,000 shares authorized, 400,000 shares issued and outstanding $2,000,000
Additional paid-in capital on common $18,000,000
Retained earnings $37,500,000
Total stockholders' equity $65,000,000
Net income for the year was $1,395,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.50 per share was declared and paid each quarter on the common shares. The closing market price for the common shares on December 31, 2014, was $24.35 per share.
Compute:
Earnings per share
Price/Earnings Ratio
Divdend Payout Ratio
Dividend Yeild Ratio
Thank you
Explanation / Answer
Note: In the question we are given that a DPS of $ 0.50 is given Quarterly. Therefore, Annual DPS become 0.50*4 = $2 per share
PARTICULARS VALUE Net Income for the Year $ 1395000 Less: Preferred Dividends ($ 5000000 * 8%) $ 400000 a Earnings Available for Equity $ 995000 b No of Equity Shares 400000shares c Earnings Per Share [ a/b] $ 2.4875 d Closing Market Price per Share $ 24.35 e P/E Ratio = [d/c] 9.7889 f Dividend Payout ratio = DPS/EPS (0.50*4)/2.4875 80.40% g Dividend Yield = Cash Dividend per share/ Market Price per share ( 0.50*4) /24.35 0.0821