The following information was taken from the financial statements of Bailey Inc.

Question

The following information was taken from the financial statements of Bailey Inc. for December 31 of the current fiscal year: Common Stock $10 par value(no change during the year) $4000000 Preferred $5 stock, $25 par (no change during the year.) $1250000 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. i dont just want the answer. show me how to do it please. thank you

Explanation / Answer

refer this example: The following information was taken from the financial statements of Fashion Cosmetics, Inc. for December 31 of the current fiscal year: Common stock, $12 par value (no change during the year) $2,880,000 Preferred $9 stock, $100 par, cumulative, nonparticipating (no change during year) 640,000 The net income was $510,000 and the declared dividends on the common stock were $166,000 for the current year. The market price of the common stock is $43 per share. NOTE: Round to one decimal place, except earnings per share, which should be rounded to two decimal places. For the common stock, determine the (a) Earnings per share (b) Price-earnings ratio (c) Dividends per share (d) Dividend yield Solution: (a) Earnings per share = (Net income - preferred stock dividends)/Ave. No. of common shares = ($510,000 - $57,600)/240,000 = $1.89 (b) Price-earnings ratio = current stock price/earnings per share (EPS) = $43/1.89 = 22.7 (c) Dividends per share = 166,000/240,000 = 0.7 (d) Dividend yield = dividends per share/market price of common stock 0.7/43 = 1.6%

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