determine for the current year the rate earned on total assets, rate earned on s
ID: 2348081 • Letter: D
Question
determine for the current year the rate earned on total assets, rate earned on stockholders' equity, rate earned on common stockholders' equity, earnings per share on common stock, price-earnings ratio on common stock, and dividend yield on common stock. the current market price per share of common stock is $25.Current Year Preceding Year
Current assets 745000 820000
Property Plant and Equipment 1510000 1400000
Current Liabilities 160000 140000
Long term liabilities (12%) 400000 400000
Preferred 10% stock 250000 250000
Common Stock $25 par 1200000 1200000
Retained Earnings:
Beginning of year 240000 160000
Net Income for year 95000 155000
Preferred dividends declared (25000) (25000)
Common dividends declared (70000) (60000)
Explanation / Answer
A) Formula is good but answer is fomrated wrong. 11.565% B) Rate earned on stockholder's equity = Net Income / Total Stockholder's Equit 85,000 / (250,000 + 1,200,000 + 230,000)= 5.06% C) Looks good D) Earnings per share = Net Income - Perferred Dividends / Common Shares OUtstanind (85,000 - 25,000) / (1,200,000 / 25) = $1.25 E) Price-Earnings Ratio = Market Price / EPS $27 / $1.25 = $21.6 F) Shares of stock = 1,200,000 / 25 par = 48000 Dividends per share = 60,000 / 48,000 = 1.25 Dividend yield = 1.25 / 27 = 4.63%
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