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Homework answers / question archive / Chapter 12  Financial Planning Exercise 7  Calculating key stock performance metrics The Alliance Company recently reported net profits after taxes of $11

Chapter 12  Financial Planning Exercise 7  Calculating key stock performance metrics The Alliance Company recently reported net profits after taxes of $11

Finance

Chapter 12 

Financial Planning Exercise 7 

Calculating key stock performance metrics

The Alliance Company recently reported net profits after taxes of $11.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company's stock currently trades at $68 per share.

  1. Compute the stock's EPS. Round the answer to the nearest cent.

$ ____  per share

  1. What's the stock's P/E ratio? Round the answer to two decimal places.

____ times

  1. Determine what the stock's dividend yield would be if it paid $4.15 per share to common stockholders. Round the answer to two decimal places.

 %_____

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1) Computation of Earning per Share:  
Net Profit after taxes (in millions) $11.80 
Less: Preferred Dividends (in million) $1 
Earnings available to common stock holders (in millions) $10.80 
No. of Common Stock Shares Outstanding (in millions) 2.5
Earnings Per Share ($10.80 / 2.5) $4.32 

2) Computation of Stock's P/E Ratio:

P/E Ratio = Market Price Per Share / Earnings Per Share

= 68 / 4.32

= 15.74 times

 

3) Computation of Stock's Dividend Yield:

Stock's Dividend Yield = Dividend Per Share / Market Price per share * 100

= 4.15 / 68 * 100

= 6.10%

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