EPS, P/E Ratio, and Dividend Ratios The Stockholders' Equity section of the balance sheet for Balla Enterprises at the end of 2017 appears as follows: 8%, $100 par, cumulative preferred stock, 200,000 shares authorized, 50,000 shares issued and outstanding $5,000,000 Additional paid-in capital on preferred 2,500,000 Common stock, $5 par, 500,000 shares authorized, 400,000 shares issued and outstanding 2,000,000 Additional paid-in capital on common 18,000,000 Retained earnings 37,500,000 Total stockholders' equity $65,000,000 Net income for the year was $1,350,000. Dividends were declared and paid on the preferred shares during the year, and a quarterly dividend of $0.40 per share was declared and paid each quarter on the common shares. The closing market price for the common shares on December 31, 2017, was $27.65 per share. Required:
1. Compute the following ratios for the common stock:
When required, round earnings per share and price/earnings ratio answers to two decimal places. For dividend payout and dividend yield ratios, round raw calculations to 4 decimal places, but enter each answer as a percentage to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86, indicating 17.86%.
a. Earnings per share$
b. Price/earnings ratio to 1
c. Dividend payout ratio %
d. Dividend yield ratio %
2. Before recommending the stock of Balla to a client, as a financial adviser, you would like to know:
future earnings growth.
risk of the stock.
general economic trends and how they affect the company.
all of these.

Balla Enterprises

1. Ratios for the common stock:

a. Earnings per share = Net income after preferred dividend/ Outstanding common stock shares

= $2.38

b. Price/Earnings ratio

= 11.62x

c. Dividend payout ratio

= 67.23%

d. Dividend Yield = Dividend per share/Market price per share

= 5.79%

2.  Before recommending the stock of Balla to a client, as a financial adviser, you would like to know:

all of these.

Explanation:

a) Data and Calculations:

Balla Enterprises

The Stockholders' Equity section of the balance sheet at the end of 2017 8%, $100 par, cumulative preferred stock:

200,000 shares authorized

50,000 shares issued and outstanding $5,000,000

Additional paid-in capital on preferred     2,500,000

Common stock, $5 par, 500,000 shares authorized,

400,000 shares issued and outstanding 2,000,000

Additional paid-in capital on common     18,000,000

Retained earnings                                   37,500,000

Total stockholders' equity                   $65,000,000

Net income for the year =                    $1,350,000

Dividends:

Preferred stock =                                   $400,000 ($5,000,000 * 8%)

Earnings after preferred dividend = $950,000 ($1,350,000 -$400,000)

Common stock = $640,000 ($0.40 * 4 * 400,000)

Closing market price of common stock on Dec. 31, 2017 = $27.65

1. Ratios for the common stock:

a. Earnings per share = Net income after preferred dividend/ Outstanding common stock shares

= $2.38 ($950,000/400,000)

b. Price/Earnings ratio = Market price of common stock/Earnings per share

= 11.62x ($27.65/$2.38)

c. Dividend payout ratio = Dividend per share/Earnings per share

= $1.60/$2.38

= 0.6723

= 67.23%

d. Dividend Yield = Dividend per share/Market price per share

= $1.60/$27.65

= 0.0579

= 5.79%

2.  Before recommending the stock of Balla to a client, as a financial adviser, you would like to know:

all of these.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi