5 The following information is available for Heartland Compa

5. The following information is available for Heartland Company: Dividends paid to common stockholders Dividends paid to preferred stockholders Net income Weighted average common shares $45,000 50,000 300,000 100,000 outstanding Compute the earnings per share of common stock. 00,000/100,000- 3 2 6. The following information is available for Richie Ice Co: $50,000 20,000 300,000 600,000 1,000,000 Dividends paid to common stockholders Dividends paid to preferred stockholders Net income Beginning common stockholders\' equity Ending common stockholders\' equity Compute the return on common stockholders\' equity. 300,000/800,000 .375 cBook Pro 2 3 4 6

Solution

5) Earnings per share of common stock is $2.5. Net Income $        300,000 Less: Preferred Dividends $          50,000 Total Earnings available to Common Shareholders (a) $        250,000 Weighted average common shares outstanding (b) 100,000 Earning per share c = a/b $               2.50 6) Net Income $        300,000 Less: Preferred Dividends $          20,000 Total Earnings available to Common Shareholders (a) $        280,000 Average common stockholder’s equity (no of shares) (b)            800,000 Return on Equity c = a/b                 0.350