Total Assets $800,000 Current Liabilities $150,000 Long-term Liabilities $120,00
ID: 2668370 • Letter: T
Question
Total Assets $800,000Current Liabilities $150,000
Long-term Liabilities $120,000
Preffered Stock Obligation $65,000
# of common stock outstanding 30,000
Earnings available to common $48,000
P/E Ratio 20
My answer to the solution
Total Assets $800,000
Current Liabilities $150,000
Long-term Liabilities $120,000
Stockholders' Equity $650,000
Preffered Stock Obligation $65,000
Net Worth assigned to common $585,000
# of common outstanding 30,000
Book Value per share $19.50
Earnings avilable to common $48,000
# of common outstanding 30,000
Earnings per share $1.60
P/E Ratio 20
Price of share $32.00
Market to book value per share 0.90
Explanation / Answer
Book value per share is (Assets minus liabilities- preferred)/common shares outstanding). 800,000-150,000-120,000-65,000= 465,000/30,000= $15.50 per share. Earnings available to common /common outstanding = earnings per share 48,000/30,000= $1.60 per share P/E ratio given at 20 So stock price = EPS* P/E ratio 1.60*20= $32 per share. Market to book value would be $32/$15.50= 2.06