Stock prices are widely quoted in newspapers and online To g

Stock prices are widely quoted in newspapers and online. To get some practice reading and interpreting these quotes, use the following stock quote for RJW Enterprises, Inc. to answer the following questions.

Use the reported dividend, dividend yield, and net price change to calculate yesterday\'s closing stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

The company currently has 19 million shares of stock outstanding. Use today\'s closing price and the PE ratio to estimate the company\'s net income (also called earnings). (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solution

Answer:

a) Dividend yield = Dividend / Stock price

or, Stock price = Dividend / Dividend yield = 1.60 / 0.025 = $64

This is the current stock price.

Yesterday\'s closing price = Current stock price - net change = $64 - (-)0.35 = $64.35

b) PE ratio = Current stock price / Earnings per share

or, Earnings per share = Current Stock price / PE ratio = $64/ 15 = $4.267

Net income = Earnigns per share x no. of shares outstanding = $4.267 x 19,000,000 = $ 81,073,000