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Question - Sunland Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2019 and 2020 follow.
Comparative Balance Sheet As of December 31
2020
2019
Assets
Current assets
Cash
$390,000
$417,450
Accounts receivable, net
1,079,000
776,450
Inventory
729,000
681,100
Other current assets
381,400
247,100
Total current assets
2,579,400
2,122,100
Property, plant, & equipment, net
8,659,740
8,439,815
Total assets
$11,239,140
$10,561,915
Liabilities and Stockholders' Equity
Current liabilities
$3,178,000
$2,846,050
Long-term debt
3,702,700
3,892,600
Total liabilities
6,880,700
6,738,650
Preferred stock, $5 par value
58,900
Common stock, $0.25 par value
104,600
103,850
Retained earnings
4,194,940
3,660,515
Total stockholders' equity
4,358,440
3,823,265
Total liabilities and stockholders' equity
Sunland Medical Comparative Income Statement and Statement of Retained Earnings For the Year
Sales revenue (all on account)
$10,177,200
$9,614,000
Cost of goods sold
5,611,950
5,298,800
Gross profit
4,565,250
4,315,200
Operating expenses
2,840,200
2,634,150
Net operating income
1,725,050
1,681,050
Interest expense
300,300
308,600
Net income before taxes
1,424,750
1,372,450
Income taxes (30%)
427,425
411,735
Net income
$997,325
$960,715
Dividends paid
Preferred dividends
29,550
29,450
Common dividends
433,350
413,100
Total dividends paid
462,900
442,550
Net income retained
534,425
518,165
Retained earnings, beginning of year
3,142,350
Retained earnings, end of year
$4,194,940
$3,660,515
Required -
A. Calculate the earnings per share (average of 418,000 shares outstanding for the year) for 2020.
B. Calculate the price/earnings ratio (market price of $48 at year-end) for 2020.
C. Calculate the dividend payout ratio (dividends of $1.25 per common share for the year) for 2020.
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