Net income = $755,000 So, the earnings per share were: EPS = Net income / Shares outstanding EPS = $755,000 / 570,000 EPS = $1.32 per The dividends per share were: Dividends per share = Total dividends / Shares outstanding Dividends per share = $130,000 / 570,000 Dividends per share = $0.23 per share The book value per share was: Book value per share = Total equity / Shares outstanding Book value per share = $7,200,000 / 570,000 Book value per share = $12.63 per share The market-to-book ratio is: Market-to-book ratio = Share price / Book value per share Market-to-book ratio = $29 / $12.63 Market-to-book = 2.30 times The P/E is: P/E ratio = Share price / EPS P/E ratio = $29 / $1.32 P/E ratio = 21.89 times Sales per share are: Sales per share = Total sales / Shares outstanding Sales per share = $10,500,000 / 570,000 Sales per share = $18.42 The P/S ratio is: P/S ratio = Share price / Sales per share P/S ratio = $29 / $18.42 P/S = 1.57 times With the information given, we must use the Du Pont identity to calculate return on equity. Doing 7. so, we find: ROE = (Profit margin)(Total asset turnover)(Equity multiplier) ROE = (.07)(1.64)(1.35) ROE = 0.1550 or 15.50%
Net income = $755,000 So, the earnings per share were: EPS = Net income / Shares outstanding EPS = $755,000 / 570,000 EPS = $1.32 per The dividends per share were: Dividends per share = Total dividends / Shares outstanding Dividends per share = $130,000 / 570,000 Dividends per share = $0.23 per share The book value per share was: Book value per share = Total equity / Shares outstanding Book value per share = $7,200,000 / 570,000 Book value per share = $12.63 per share The market-to-book ratio is: Market-to-book ratio = Share price / Book value per share Market-to-book ratio = $29 / $12.63 Market-to-book = 2.30 times The P/E is: P/E ratio = Share price / EPS P/E ratio = $29 / $1.32 P/E ratio = 21.89 times Sales per share are: Sales per share = Total sales / Shares outstanding Sales per share = $10,500,000 / 570,000 Sales per share = $18.42 The P/S ratio is: P/S ratio = Share price / Sales per share P/S ratio = $29 / $18.42 P/S = 1.57 times 7. With the information given, we must use the Du Pont identity to calculate return on equity. Doing so, we find: ROE = (Profit margin)(Total asset turnover)(Equity multiplier) ROE = (.07)(1.64)(1.35) ROE = 0.1550 or 15.50%
Chap003.docx