Ahab Fisheries Inc

question 16

Essay

Ahab Fisheries Inc. has authorized share capital of an unlimited number of common shares and 300,000 $2-cumulative preferred shares.
As of January 1, 2014, 50,000 common shares had been issued at an average cost of $4 each. During 2014, 10,000 common shares were issued on April 1 for cash of $45,000 and on July 1, 20,000 were issued at $4.75 each. On December 15, a cash dividend of $0.50 per share on all common shares was declared, payable to shareholders of record on December 31, and payable on January 20, 2015.
On January 1, 2014, the first preferred shares were issued. $600,000 was received for 80,000 preferred shares. On October 1, the annual dividends on the preferred shares were declared, payable to shareholders of record on October 15, and payable on October 28.
Retained earnings on January 1, 2014 were $336,000 and accumulated other comprehensive income was $57,000. Ahab had profit of $323,000 in 2014, and other comprehensive income items totalling $37,500. All dividends were paid on their due dates. On December 31, 2014, Ahab's common shares were trading at $76.50.
Instructions
a. Calculate the profit available to common shareholders.
b. Calculate the weighted average number of common shares in 2014.
c. Calculate the earnings per share.
d. Calculate the price-earnings ratio at December 31, 2014.

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Definitions:

User Cost

The opportunity cost of using a durable good, which includes depreciation and the foregone interest on the funds tied up in owning the good.

Market Rate

The prevailing price or interest rate for goods, services, or securities in a competitive marketplace.

User Cost

The cost of using a good or service, which includes the opportunity cost of not using the asset in an alternative use.

Opportunity Cost

The cost of choosing one option over another, typically represented by the benefits that could have been gained by choosing the alternative.