Question

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

Answer:

Earnings per share = 6.5

Dividend Pay-out Ratio = 0.31

Price Earning Ratio = 30.77

Explanation:

As per given information,

Profit before taxes = 50 lakhs

Share capital = 5 lakhs

Divident / share = 2

Price of the share = 200

Now solving each one by one;

Earnings per share = Profit/Share capital,

EPS = 50 × (1−0.35) /5 = 6.5.

Dividend Pay-out Ratio = Dividend per share/Earnings per share,

DP ratio = 2/6.5 = 0.31.

Price earnings ratio = Price per share/Earnings per share,

Price Earning ratio = 200/6.5 = 30.77.

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