Bookmarks@ Homepage-MCM. D My Weekly Schedule 3 Coinbase Khan Academy|F Yaho Dav

Question

Bookmarks@ Homepage-MCM. D My Weekly Schedule 3 Coinbase Khan Academy|F Yaho David's Magic Stores has an operating David's Magic Stores has 19,000 shares of common stock outstanding a Calculate the EPS and the common dividends per share for David's Magic Stores. (Round the final profit of $270.000 Interest expense for the year was $24.000 were $31,000, and common dividends paid were $49,000. The tax was $52,400 answers to 2 decimal places.) EPS Common dividends per share b. What is the payout ratio? (Do not round intermediate calculations. Round the final answer to2 decimal places) c. What was the increase in retained eamings for the year? Increase in retained eamings d. If David's share price is $84.00 what is its price-eamings ratio (P/E)? (Do not round intermediate calculations. Round the final answer to 2 decimal places References Book & Resources Problem 2-9 Leaming Objective 02-01 18 30 p 88 esc oob a Fs F2 F4

Explanation / Answer

a)

Net income = Operating profit - interest - tax

Net income = 270,000 - 24,000 - 52,400

Net income = $193,600

193,600 - 31,000 = 162,600

EPS = 162,600 / Shares outstanding

EPS = 162,600 / 19,000

EPS = 8.56

Common dividend per share = Common dividends / shares outstanding

Common dividend per share = 49,000 / 19,000

Common dividend per share = 2.58

b)

Payout ratio = ( common dividends / net income) * 100

Payout ratio = ( 49,000 / 193,600) * 100

Payout ratio = 25.31%

c)

Increase in retained earnings = Net income - common dividends - preferred dividends

Increase in retained earnings = 193,600 - 49,000 - 31,000

Increase in retained earnings = $113,600

d)

P/E ratio = share price / EPS

P/E ratio = 84 / 8.56

P/E ratio = 9.81

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