Q21E Data for Oxford State Bank follo... [FREE SOLUTION]

Chapter 15: Q21E (page 842)

Data for Oxford State Bank follow:

2018
2017
Net Income
$71,900
$64,300
顿颈惫颈诲别苍诲蝉鈥擟辞尘尘辞苍
22,000
22,000
顿颈惫颈诲别苍诲蝉鈥摈谤别蹿别谤谤别诲
16,800
16,800
Total Stockholders鈥� Equity at Year-End (includes 95,000 shares of common stock)
770,000
610,000

Net Income
$ 71,900
$ 64,300
Market Price per Share of Common Stock
$ 16.50
$ 10.00

Evaluate the common stock of Oxford State Bank as an investment. Specifically,
use the three stock ratios to determine whether the common stock has increased or decreased in attractiveness during the past year. Round to two decimal places.

Short Answer

Expert verified

Answer

The analysis of three stock ratio indicates that attractiveness of common stock of the company has increased because EPS increased from 0.50 to 0.58, Price earnings ratio increased from 20.00 to 28.45 from year 2017 to 2018.

Step by step solution

Calculation of EPS & PER

Earnings Per Share = Net Income- Preferred Dividend/ Common Share Outstanding

For 2018

EPS = $71,900-16,800/95,000

= $0.58

For 2017

EPS= $64,300-16,800/95,000

=$0.50

Price-Earnings Ratio= Market Price per share of common stock/ EPS

For 2018

PER = $16.50/$0.58

=28.45

For 2017

PER= $10.00/0.50

=20.00

Calculate Dividend Yield Ratio

Dividend Yield Ratio = Annual Dividend per share/ Market price per share

For 2018

Annual dividend for share =Total Dividend Paid / Common Share Outstanding

= $22,000/95,000

=0.23

So, Dividend yield Ratio = $0.23/16.50

=1.40%

For 2017

Annual dividend for share = $22,000/95,000

=0.23

So, Dividend Yield Ratio= $0.23/10.00

=2.3%

Calculate dividend payout ratio

Dividend Pay- out Ratio = Annual Dividend per share/ EPS

For 2018

Dividend Pay- out =$0.23/ 0.58

=39.65%

For 2017

Dividend pay- out = $0.23/0.50

=46%

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Cash	\(19,000
Accounts Receivable, Net	82,000
Merchandise Inventory	183,000
Total Assets	638,000
Accounts Payable	102,000
Accrued Liabilities	35,000
Short-term Notes Payable	50,000
Long-term Liabilities	221,000
Net Income	69,000
Common Shares Outstanding	50,000 shares

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Short Answer

Step by step solution

Calculation of EPS & PER

Calculate Dividend Yield Ratio

Calculate dividend payout ratio

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	2018	2017
Net Income	\(71,900	\)64,300
顿颈惫颈诲别苍诲蝉鈥擟辞尘尘辞苍	22,000	22,000
顿颈惫颈诲别苍诲蝉鈥摈谤别蹿别谤谤别诲	16,800	16,800
Total Stockholders鈥� Equity at Year-End (includes 95,000 shares of common stock)	770,000	610,000
Net Income	\( 71,900	\) 64,300
Market Price per Share of Common Stock	\( 16.50	\) 10.00