You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company's financial statements, including comparing Lydex's performance to its major competitors. The company's financial statements for the last two years are as follows:

Lydex Company Comparative Balance Sheet
		This Year	Last Year
Assets
Current assets:
Cash		$960,000	$1,260,000
Marketable securities		0	300,000
Accounts receivable, net		2,700,000	1,800,000
Inventory		3,900,000	2,400,000
Prepaid expenses		240,000	180,000
Total current assets		7,800,000	5,940,000
Plant and equipment, net		9,300,000	8,940,000
Total assets		$17,100,000	$14,880,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities		$3,900,000	$2,760,000
Note payable, 10%		3,600,000	3,000,000
Total liabilities		7,500,000	5,760,000
Stockholders' equity:
Common stock, $78 par value		7,800,000	7,800,000
Retained earnings		1,800,000	1,320,000
Total stockholders' equity		9,600,000	9,120,000
Total liabilities and stockholders' equity		$17,100,000	$14,880,000

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Lydex Company Comparative Income Statement and Reconciliation
		This Year	Last Year
Sales (all on account)		$15,750,000	$12,480,000
Cost of goods sold		12,600,000	9,900,000
Gross margin		3,150,000	2,580,000
Selling and administrative expenses		1,590,000	1,560,000
Net operating income		1,560,000	1,020,000
Interest expense		360,000	300,000
Net income before taxes		1,200,000	720,000
Income taxes (30%)		360,000	216,000
Net income		840,000	504,000
Common dividends		360,000	252,000
Net income retained		480,000	252,000
Beginning retained earnings		1,320,000	1,068,000
Ending retained earnings		$1,800,000	$1,320,000

To begin your assignment, you gather the following financial data and ratios that are typical of companies in Lydex Company's industry:

Current ratio	2.3
Acid-test ratio	1.2
Average collection period	30 days
Average sale period	60 days
Return on assets	9.5%
Debt-to-equity ratio	0.65
Times interest earned ratio	5.7
Price-earnings ratio	10

1. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $72 per share and that at the end of last year it was $40. For both this year and last year, compute:
   1. The earnings per share.
   2. The dividend yield ratio.
   3. The dividend payout ratio.
   4. The price-earnings ratio. How do investors regard Lydex Company as compared to other companies in the industry? Explain.
   5. The book value per share of common stock. Does the difference between market value per share and book value per share suggest that the stock at its current price is a bargain? Explain.