Preferred Stock6 30 par value 2000 shares authorized 1000 sh

Preferred Stock—6%, $30 par value; 2,000 shares authorized, 1,000 shares

issued and outstanding $30,000

Common Stock—$2 par value; 95,000 shares authorized, 52,000 shares

issued, 50,100 shares outstanding 104,000

Paid-In Capital in Excess of Par—Common 450,000

Treasury Stock—Common; 1,900 shares at cost (38,000)

DATA TABLE ABOVE

Altar Corp. earned net income of $ 252,300 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Altar?\'s books include the following? figures:

Requirement 1. Compute Altar?\'s EPS for the year.

Select the? formula, then enter the amounts to calculate the? company\'s earnings per share for 2018. ?(Abbreviations used: Ave.? = average, OS? = outstanding, SE? = stockholders\'? equity, shrs? = shares. Enter the earnings per share to the nearest? cent.)

(__________ -__________ ) /_________________ = Earnings per share

(__________ -__________ ) /_________________ = _______________

Requirement 2. Assume Altar?\'s market price of a share of common stock is $ 11 per share. Compute Altar?\'s ?price/earnings ratio. Select the? formula, then enter the amounts to calculate the? company\'s price/earnings ratio for 2018. ?(Abbreviations used: Ave.? = average, OS? = outstanding, SE? = stockholders\'? equity, shrs? = shares. Enter the ratio to two decimal? places.)

___________/______________ = Price/earnings ratio

___________/______________ =_________________

Solution

Solution 1:

Net Income for 2018 = $252,300

Earning for common shareholders = $252,300 - $30,000*6% = $250,500

Weighted average outstanding shares = 50100 shares

Earning per share = Earnings for common shareholders / Weighted average outstanding shares

= $250,500 / 50100 = $5 per share

Solution 2:

Market price per share of common stock = $11

Earning per share = $5

Price earning ratio = Market price per share / Earning per share = $11 / $5 = 2.20