The Morton Company recently reported net profits after taxes of $14.2 million. I
ID: 2816006 • Letter: T
Question
The Morton Company recently reported net profits after taxes of $14.2 million. It has 4.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company's stock currently trades at $71 per share.
A) Compute the stock's earnings per share (EPS). Round the answer to two decimal places.
$_______ per share
B) What's the stock's P/E ratio? Round the answer to two decimal places.
$_________ times
C) Determine what the stock's dividend yield would be if it paid $4.62 per share to common stockholders. Round the answer to two decimal places.
____________%
Explanation / Answer
A) Computation of stock's earnings per share (EPS)
EPS = Earnings available to common stock holders / Number of shares of common stock outstanding
B) What's the stock's P/E ratio
PE Ratio = Market price per share / Earnings per share.
= 71 / 2.93
= 24.23
C) Determine what the stock's dividend yield
Dividend yield = Annual Dividend per share / Price per share
= 4.62/71
= .0651
= 6.51%
$ in millions PAT 14.20 Less: Preferred Dividend 1.00 Earnings available to common stock holders 13.20 Shares Outstanding 4.50 EPS 2.93