The Stockholders' Equity section of the balance sheet for Obregon, Inc. at the end of 2017 appears as follows: 8%, $100 par, cumulative preferred stock, 200,000 shares $5,000,000 authorized, 50,000 shares issued and outstanding Additional paid-in capital on preferred 2,500,000 Common stock, $5 par, 500,000 shares authorized, 400,000 shares issued and outstanding 2,000,000 Additional paid-in capital on common 18,000,000 Retained earnings 37,500,000 Total stockholders' equity $65,000,000 Net income for the year was $1,270,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.25 per share was declared and paid each quarter on the common shares. The closing market price for the common shares on December 31, 2017, was $21.95 per share. Required: 1. Compute the following ratios for the common stock: When required, round earnings per share and price/earnings ratio answers to two decimal places. For dividend payout and dividend yield ratios, round raw calculations to 4 decimal places, but enter each answer as a percentage to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86, indicating 17.86%. a. Earnings per share 2.25 b. Price/earnings ratio 12.51 X to 1 c. Dividend payout ratio 0.53 X % d. Dividend yield ratio 4.5 X % 2. Before recommending the stock of Obregon to a client, as a financial adviser, you would like to know: a. future earnings growth. b. risk of the stock. c. general economic trends and how they affect the company. d. all of these.
The Stockholders' Equity section of the balance sheet for Obregon, Inc. at the end of 2017 appears as follows: 8%, $100 par, cumulative preferred stock, 200,000 shares $5,000,000 authorized, 50,000 shares issued and outstanding Additional paid-in capital on preferred 2,500,000 Common stock, $5 par, 500,000 shares authorized, 400,000 shares issued and outstanding 2,000,000 Additional paid-in capital on common 18,000,000 Retained earnings 37,500,000 Total stockholders' equity $65,000,000 Net income for the year was $1,270,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.25 per share was declared and paid each quarter on the common shares. The closing market price for the common shares on December 31, 2017, was $21.95 per share. Required: 1. Compute the following ratios for the common stock: When required, round earnings per share and price/earnings ratio answers to two decimal places. For dividend payout and dividend yield ratios, round raw calculations to 4 decimal places, but enter each answer as a percentage to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86, indicating 17.86%. a. Earnings per share 2.25 b. Price/earnings ratio 12.51 X to 1 c. Dividend payout ratio 0.53 X % d. Dividend yield ratio 4.5 X % 2. Before recommending the stock of Obregon to a client, as a financial adviser, you would like to know: a. future earnings growth. b. risk of the stock. c. general economic trends and how they affect the company. d. all of these.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Answer both the question 1 and 2.if answered within 40mins,it would be appreciable!!
Transcribed Image Text:EPS, P/E Ratio, and Dividend Ratios
The Stockholders' Equity section of the balance sheet for Obregon, Inc. at the end of 2017 appears as follows:
8%, $100 par, cumulative preferred stock, 200,000 shares
$5,000,000
authorized, 50,000 shares issued and outstanding
Additional paid-in capital on preferred
2,500,000
Common stock, $5 par, 500,000 shares authorized, 400,000 shares
2,000,000
issued and outstanding
Additional paid-in capital on common
18,000,000
Retained earnings
37,500,000
Total stockholders' equity
$65,000,000
Net income for the year was $1,270,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.25 per share was declared and paid each quarter on the common shares. The closing market price for
the common shares on December 31, 2017, was $21.95 per share.
Required:
1. Compute the following ratios for the common stock:
When required, round earnings per share and price/earnings ratio answers to two decimal places. For dividend payout and dividend yield ratios, round raw calculations to 4 decimal places, but enter each answer as a percentage to two decimal places;
for example, .17856 rounds to .1786 and would be entered as 17.86, indicating 17.86%.
a. Earnings per share
2.25 x
b. Price/earnings ratio
12.51 X to 1
c. Dividend payout ratio
0.53 x %
d. Dividend yield ratio
4.5 x %
2. Before recommending the stock of Obregon to a client, as a financial adviser, you would like to know:
a. future earnings growth.
b. risk of the stock.
c. general economic trends and how they affect the company.
d. all of these.
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