The MedTech Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1.0 million per year. a. Compute the firm's earnings per share (EPS). b. Assuming that the stock currently trades at $60.00 per share, determine what the firm's dividend yield would be if it paid $ 2.00 per share to common stockholders. c. What would the firm's dividend payout ratio be if it paid $2.00 per share in dividends?

EPS 5.92

dividend yield: 3.33%

payout ratio: 0.3378

Explanation:

Earnings per share:

EPS = (income - preferred dividends) / common stock utstanding

EPS = (15,800,000 - 1,000,000)/ 2,500,000 = 5.92

dividend yield:

dividend per share / market price

$2.00 / $60.00 = 0.03333 = 3.33%

payout ratio:

dividends per share / earning per share

2 / 5.92 = 0,3378

Explanation:

What is given:

Net profit = $15.8m

Common stock = 2.5 m

Preferred dividends = $1m

a. Compute the firm's earnings per share (EPS)

Earnings for Common stockholders = net profit - preferred dividends =

= 15.8 - 1 = 14.8m

EPS = equity/number of shares = 14.8/2.5 = $5.92/share

b. Current stock price = $60

pays $2 to common stockholders

Dividend yield = Dividend per Share*100/Market Price per Share =

= 2*100/60 = $3.33

c.

Paid $2.00 per share in dividends

Dividend payout ratio = DPS/EPS = 2/5.92 = 0.34 = 34%

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