Sehrt Corporation has provided the following financial data: Year 2Year 1Common stock, $3 par value$300,000 $300,000 Total stockholders' equity$803,000 $770,000 The company's net income for Year 2 was $44,000. Dividends on common stock during Year 2 totaled $11,000. The market price of common stock at the end of Year 2 was $6.29 per share.Required:a. What is the company's earnings per share for Year 2?b. What is the company's price-earnings ratio for Year 2?c. What is the company's dividend payout ratio for Year 2?d. What is the company's dividend yield ratio for Year 2?e. What is the company's book value per share at the end of Year 2?
What will be an ideal response?
| a. | Earnings per share = Net Income ÷ Average number of common shares outstanding* |
*Number of common shares outstanding = Common stock ÷ Par value
= $300,000 ÷ $3 per share = 100,000 shares
| b. | Price-earnings ratio = Market price per share ÷ Earnings per share |
| c. | Dividend payout ratio = Dividends per share* ÷ Earnings per share |
*Dividends per share = Common dividends ÷ Common shares (see above)
= $11,000 ÷ 100,000 shares = $0.11 per share (rounded)
| d. | Dividend yield ratio = Dividends per share* ÷ Market price per share |
*Dividends per share = Common dividends ÷ Common shares (see above)
= $11,000 ÷ 100,000 shares = $0.11 per share (rounded)
| e. | Book value per share = Common stockholders' equity ÷ Number of common shares |
= $803,000 ÷ 100,000 shares = $8.03 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $300,000 ÷ $3 per share = 100,000 shares
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