Answer to Question #101128 in Economics for varsha

Question

Following information is available in respect of a company named, as Beta Ltd

Particulars Amount -
Profit before taxes Rs 50 lakhs
Dividend declared per share Rs2
Price of the share prevalent on stock
exchange Rs 200
Applicable tax rate 35%
Share capital of company 5 lakh shares
of Rs 10 each

Calculate-
Earnings per share,
Dividend Pay-out Ratio,
Price earnings ratio

Answer 1

The following is the answer for the question

• Earnings per share =profit/share capital

profit =50*(1-35/100)lakhs

=32.5lakhs

share capital =5lakh

therefore earnings per share =32.5lakh/5lakh=6.5

• Dividend pay out ratio=dividend declared per share /earnings per share

our dividend is Rs 2 and our earnings is 6.5

therefore 2/6.5

=0.31 is the dividend pay out ratio.

• price earnings ratio =price per share /earnings per share

price per share =Rs 200

earnings per share =6.5

200/6.5=30.77

price earnings ratio=30.77