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The Carlton Corporation has $4 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 30. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)

The Carlton Corporation has $4 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 30. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Carlton Corporation has $4 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 30. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
Transcribed Image Text:The Carlton Corporation has $4 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 30. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
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