1) The BMT corporation has a stock price of $75 per share, and has 20 million sh

Question

1) The BMT corporation has a stock price of $75 per share, and has 20 million shares of stock outstanding. During the most recent year, the company had $100 million of net income and paid $30 million in common stock dividends.

            a) Compute BMT's earnings per share

            b) Compute BMT's dividend payout ratio

            c) Compute BMT's price-earnings (P/E) ratio

            d) Compute BMT's market capitalization

            e) Compute BMT's market capitalization category (small-, mid-, or large-cap)

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

BMT's Earnings Per Share = Net Income/Common Stock Outstanding = 100/20 = $5

Part B:

BMT's Dividend Payout Ratio = Dividend Paid/Net Income*100 = 30/100*100 = 30%

Part C:

Price Earning Ratio = Market Price Per Share/Earnings Per Share = 75/5 = 15

Part D:

Market Capitalization = Number of Shares Outstanding*Market Price Per Share = 20*75 = $1500 million

Part E:

BMT is a Small-Cap firm as it its Market Capitalization of 1500 millions or 1.5 billion falls within 250 million to 2 billion category.

Thanks.

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