The terms that are included in the common stock of a company as – authorized capital, issued and outstanding, shares bought back or treasury stock . The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive. Requirement 1 To determine: Book value per share for each company using these data

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Answer 1

Question

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

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Over the units in a batch

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 $ 120,000 $ 130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2024. Multiple Choice $146,800 $160,800 $107,800 $80,000 $140,000

Answer 2

Question

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

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Answer 3

Question

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

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Answer 5

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

Answer 6

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

Answer 7

Chapter 13, Problem 2BTN

To determine

Concept Introduction:

The terms that are included in the common stock of a company as $-$ authorized capital, issued and outstanding, shares bought back or treasury stock. The company pays return to its investors in the form of dividends. The earning potential on the shares is calculated. The measure that is used to know the potential is Earnings per share. It can be basic as well as dilutive.

Requirement 1

To determine:

Book value per share for each company using these data

Answer 8

Expert Solution

Explanation of Solution

For Apple, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 119,355 (in millions)

• Common stock outstanding = 5,578.753 (in millions)

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{119, 355 m i l l i o n s}{\cdot 5, 578.753 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 21.39 \end{array}$

Thus, book value per share for 2015 = 21.39.

For Google, it is calculated as under.

The book value of a share is calculated using a formula $-$

$B o o k V a l u e p e r s h a r e = \frac{T o t a l s h a r e h o l d e r' s e q u i t y}{C o m m o n S t o c k O u t s t s \tan d i n g}$

For, Apple.

• Total Shareholder’s Equity = $ 120,331 millions

• Common stock outstanding = 687.348

$\begin{array}{l} B o o k V a l u e p e r s h a r e = \frac{120, 331 m i l l i o n s}{687.348 m i l l i o n s} \\ B o o k V a l u e p e r s h a r e = $ 175.07 \end{array}$

Thus, book value per share for 2015 = 175.07

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

Requirement 2

To compute:

Basic EPS for each company

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

Answer 13

To determine

Requirement 2

To compute:

Basic EPS for each company

Answer 14

Expert Solution

Explanation of Solution

The Basic EPS is calculated by using the formula $-$

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

For Apple, Basis EPS $-$

The net income = $ 53,394 million and Weighted average common stock = 5,753.421 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 53, 394 m i l l i o n}{5.753, 421 m i l l i o n} \\ B a s i c E P S = $ 9.28 \end{array}$

Thus, Basic EPS for Apple = $ 9.28

For Google, Basis EPS $-$

The net income = $ 16,348 million and Weighted average common stock = 684.626 million

$B a s i c E P S = \frac{N e t I n c o m e}{W e i g h t e d A v e r a g e C o m m o n S t o c k}$

$\begin{array}{l} B a s i c E P S = \frac{$ 16, 348 m i l l i o n}{684.626 m i l l i o n} \\ B a s i c E P S = $ 23.89 \end{array}$

Thus, Basic EPS for Google = $ 23.89.

Answer 15

Expert Solution

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

To determine

Requirement 3

To compute:

Dividend yield for each company-

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

Answer 19

To determine

Requirement 3

To compute:

Dividend yield for each company-

Answer 20

Expert Solution

Explanation of Solution

Dividend yield for Apple = 1.90 %

Dividend yield for Google = 0 %

These are calculated as under $-$

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

For Apple $-$

• Cash dividends =$ 1.98

• Market price per share = $ 107

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{1.98}{107} \\ D i v i d e d y i e l d = 1.90 % \end{array}$

For Google $-$

• Cash dividends = 0

• Market price per share =$ 775.10

Dividend yield =

$D i v i d e d y i e l d = \frac{C a s h D i v i d e n d}{M a r k e t p r i c e p e r s h a r e}$

$\begin{array}{l} D i v i d e d y i e l d = \frac{0}{775.10} \\ D i v i d e d y i e l d = 0 % \end{array}$

No, the dividend yield does not characterize the net income of a company as for Apple the dividend yield is 1.90 % while the dividend yield for Google is 0% as it paid no cash dividends for the year. But both the companies has earned the net profit.

Only, Apple’s dividend yield is characterizing its net income or growth.

Answer 21

Expert Solution

Answer 22

Expert Solution

Answer 23

Expert Solution

Answer 24

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.

Answer 25

To determine

Requirement 4

To Compute:

Price-earnings ratio for each company

Answer 26

Expert Solution

Explanation of Solution

Price-earnings ratio for Apple = 11.53

Price-earnings ratio for Google = 32.44

These ratios are calculated as under $-$

Price-earnings ratio for Apple =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 107

• Earnings per share = $ 9.28

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 107}{$ 9.28} \\ \Pr i c e - e a r n i n g s r a t i o = 11.53 \end{array}$

Price-earnings ratio for Google =

$\Pr i c e - e a r n i n g s r a t i o = \frac{M a r k e t p r i c e p e r s h a r e}{E a r n i n g s p e r s h a r e}$

• Market price per share = $ 775.10

• Earnings per share = $ 23.89

$\begin{array}{l} \Pr i c e - e a r n i n g s r a t i o = \frac{$ 775.10}{$ 23.89} \\ \Pr i c e - e a r n i n g s r a t i o = 32.44 \end{array}$

The price-earnings ratio measures the potential of a share of earnings taking market price of the share and earnings per share.

The price-earnings ratio of Google is more when compared with Apple. Thus, it means, if a person invests in the shares of Google, he will earn more when compared with Apple.