I need help with a. I was able to figure out b-d. The following information was

Question

I need help with a. I was able to figure out b-d. The following information was taken from the financial statements of Bailey Inc. for December 31 of the current fiscal year: The net income was $1,250,000 and the declared dividends on the common stock were $800,000 for the current year. The market price of the common stock is $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. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest cent. a. Earnings per Share: $ b. Price-Earnings Ratio: c. Dividends per Share: $ d. Dividend Yield: %

Explanation / Answer

Earnings per Share means Net Income less Preferred dividends / Common shs outstanding Net Income $1,250,000 Pfd Stock - $1,250,000 / $25 = 50,000 shs x $5 = 250,000 Div due on Pfd (BTW, the two amounts of $1,250,000 are a coincidence, just meant to confuse you) Earnings available to Common shareholders = $1,000,000 Common shs outstanding - $4.0 mil / $10 par = 400,000 EPS = $1,000,000 / 400,000 = $2.50

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