Chapter 14

Calculating Dividend Amounts. Betty and John Martinez own 220 shares of ExxonMobil common stock. ExxonMobil's quarterly dividend is $1.76 per share. What is the amount of the dividend check that the Martinez couple will receive for this quarter?

$387.20 (Quarterly dividend = 220 shares $1.76 = $387.20)

Calculating Earnings Per Share, Price-Earnings Ratio, and Book Value. As a stockholder in Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $9 million, liabilities of $5 million, after-tax earnings of $2 million, and 750,000 outstanding shares of common stock. a. Calculate the earnings per share of Bozo Oil's common stock. Round to two decimals.

$2.67 (2,000,000/750,000)

Calculate the book value of a share of Bozo Oil's common stock. Round to two decimals.

$5.33 ((Assets - Liabilities) / Number of shares outstanding = Book value per share)

c. Calculate the total return for your Coca-Cola investment when you sold the stock at the end of two years.

$859 (Current Return = ($1.55 per share + $1.67 per share) 100 shares = $322 Capital Gain = ($58 per share selling price - $52 per share purchase price) 100 shares = $600 - ($29 per share + $34 per share) commissions = $537 Total Return = $322 Dividends + $537 Capital Gain = $859)

b. Assuming that a share of Bozo Oil's common stock has a market value of $40, what is the firm's price-earnings ratio?

15 (40/2.67)

d. Calculate the holding period return for your Coca-Cola investment at the end of the two-year period. (hint: your return = profit/initial investments)

16.43% (Original investment = (100 shares x $52 purchase price per share) + $29 commission = $5,229 holding period return = $859 total return / $5,229 initial investment)

b.Calculate the dividend yield for your Coca-Cola stock at the time you sold it.

2.88%

Two years ago, you purchased 100 shares of Coca-Cola Company. Your purchase price was $52 a share, plus a total commission of $29 to purchase the stock. During the last two years, you have received the following dividend amounts: $1.55 per share for the first year, and $1.67 per share, the second year. Also assume that at the end of two years, you sold your Coca-Cola stock for $58 a share minus a total commission of $34 to sell the stock. a. Calculate the dividend yield for your Coca Cola stock at the time you purchased it.

2.98% ($1.55 per share first year dividend ÷ $52 original purchase price = 0.0298 = 2.98 percent.)