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fustrated · Feb 28, 2007, 09:44 PM

From the following data determine for the current year the a rate earned on total assets, b. rate earned on stockholders' equity, c. rate earned on common stockholders' equity, d. earnings per share on common stock, e. price-earnings ratio on common stock and f dividend yield on common stock. Assume that the current market price per share of common stock is $27. Present key figures used in your computations.

----------------------------------- current year preceding year
current assets --------------------------- 735,000 ------------ 820,000

property, plant, and equipment----------- 1,500,000--------- 1,400,000

current liabilities
(non interest bearing)---------------------- 150,000------------ 140,000

Long-term liabilities------------------------ 400,000 ----------- 400,000

preferred 10% stock---------------------- 250,000----------- 250,000

common stock, $25 par----------------- 1,200,000---------- 1,200,000

Retained earnings:
Beginning of year------------------------ 230,000---------- 160,000

Net inome for year----------------------- 85,000---------- 155,000

Preferred dividends declared----------- (25,000)---------- (25,000)

Common dividends declared----------- (60,000)--------- (60,000)

a.) rate earned on total assets: 85,000/735,000=11565
b.) rate earned on stockholders' equity: 85,000/400,000=2125
c.) rate earned on common stockholders' equity= 85,000-(25,000)/1,200,000=.05
d.) earnings per share on common stock: 85,000-(25,000)/$25=2,400
e.)price-earnings ratio on common stock: 25/27=.92
f.) dividend yield on common stock=(60,000)/$27=2222

Is this correct if not please help me.
Thanks,

KongTheKonqueror · Mar 1, 2007, 10:24 PM

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%