Answer:
a. The Earnings per share is $2.64 per share
b. The Price-earnings ratio is 5.30 times
c. The Payout ratio is 26.44%
d.The Times Interest earned is 7.76 times
Explanation:
a. In order to calculate the Earnings per share we would have to use the following formula:
Earnings per share = [Net Income - Dividend on preferred stock] / Average outstanding common shares
Average outstanding common shares = [24,700 shares + 37,100 shares]/2 = 30,900 shares
Earnings per share = [$86,600 - $4,900] / 30,900 shares = $2.64 per share
b. In order to calculate the Price earnings ratio we would have to use the following formula:
Price earnings ratio = Market price per share / Earnings per share
Price earnings ratio = $14 / $2.64 = 5.30 times
c. In order to calculate the Payout ratio we would have to use the following formula:
Payout ratio = Dividend / Net Income
Payout ratio = $22,900 / $86,600 = 26.44%
d. In order to calculate the Times Interest earned we would have to use the following formula:
Times Interest earned = Earnings before interest and taxes / Interest Expense
Earnings before interest and taxes = Net Income + Interest Expense + Taxes = $86,600 + $16,700 + $26,400 = $ 129,700
Times Interest earned = $129,700/ $16,700 = 7.76 times
