Chapter 13, Problem 13.33E

Computing earnings per share and price/earnings ratio

Temple Corp. earned net income of $128,500 and paid the minimum dividend to preferred stockholders for 2016. Assume that there are no changes in common shares outstanding. Temple's books include the following figures:

Preferred Stock-5%, $40 Par Value; 2,000 shares authorized, 1,000 shares issued and outstanding	$ 40,000
Common Stock-$10 Par Value; 70,000 shares authorized, 52,000 shares issued, 50,600 shares outstanding	520,000
Paid-In Capital in Excess of Par- Common	490,000
Treasury Stock-Common; 1,400 shares at cost	(28,000)

Requirements

1. Compute Temple's EPS for the year.

2. Assume Temple's market price of a share of common stock is $8 per share. Compute Temple's price/earnings ratio.