Question

Rebert Inc. showed the following balances for last year:

January 1 December 31
Stockholders' equity:
Preferred stock, $100 par, 8% $ 4,000,000 $ 4,000,000
Common stock, $3 par 3,000,000 3,000,000
Additional paid-in capital* 4,800,000 4,800,000
Retained earnings 4,000,000 4,250,000
Total stockholders' equity $15,800,000 $16,050,000
For common stock only.
Rebert's net income for last year was $3,182,000. Also, assume that the market price per share for Rebert is $51.50.

1. Compute the dollar amount of preferred dividends.

2. Compute the number of common stock.

3. Compute earnings per share.

4. Compute the price-earnings ratio.

Part 1
Preferred stock (dollar amount) $4,000,000
Dividend percentage 8%
Preferred dividends $320,000 (hint: Multiply the dollar amount by the percentage.)
Part 2
Common stock (dollar amount) $3,000,000
Par value per share $3
Number of common shares 1,000,000
Part 3
Net Income $3,181,000
Preferred dividends $320,000
Number of common shares 1,000,000
Earnings per share $2.86
Part 4
Market price per share $51.50
Earnings per share $2.86
Price-earnings ratio $18.01

Answer 1

1.Dollar amount of preferred dividends $320,000

2. Number of common stock 1,000,000

3. Earnings per share 2.86

4. Price-earnings ratio 18.01

Step-by-step explanation:

Rebert Inc

1.Preferred stock (dollar amount) $4,000,000

Dividend percentage 8%

Hence:

O.08×$4,000,000

=Preferred dividends $320,000

2.

Common stock (dollar amount) $3,000,000

÷Par value per share $3

= Number of common shares 1,000,000

3.

Net Income -Preferred dividends

÷Number of common shares

$3,182,000-$320,000/1,000,000

=$2,862,000/1,000,000

Earnings per share $2.86

4.

Market price per share /Earnings per share

$51.50/$2.86

=Price-earnings ratio $18.01