Mind Tap Assignment 04 Analysis of Financial Statements Due Today at 11 m cST Ba

Question

Mind Tap Assignment 04 Analysis of Financial Statements Due Today at 11 m cST Back to Assignment Attempts: 3 Do No Harm: 3/4 6. Market value ratios Ratios are mostly calaulated based on the financial statements of a firm. However, another group of ratios, called market-based ratios, relate to afirm's observable market value, stockprices, and book values, integrating information from both the market and the frm's financial statements. Consider the case of Taggart Goods Corp. Taggart Goods Corp. just reported a net income of $9,750,000, and its current stock price is $20-25 per share. Taggart Goods Corp. is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 2,900,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8A00,000). If Taggart Goods Corp.'s forecast turns out to be correct and its price-to-earnings (PE) io does not change, what does Taggart Goods Corp. expect its stock price to be one year from now? $16.59 $20.25 $12.44 $20.74 One year later, Taggart Goods Corp.'s stock trading at $23.39, and the company reports its common equity value M a Search the web and Windows

Explanation / Answer

For first part refer to the table below so, option b is correct as value is near the value as suggested.

For part b of the question please check below this line:

c is correct but financially this sitaution if it arrives the business will not continue for long and business is not workable as well.

In d option b is correct as low P/E ratio means that earnings per share are low, or it could be that there are low shareholders o/s or current stock price is undervalued or earnings are not sufficient as well. But, if we analyze first statement of the option high P/E ratio implies sufficient earnings for the shareholders as well as stock price is not undervalued and return each shareholder gets is sufficient or is satisfactory.

Particulars Current year Next year Differential Net profit $ 9,750,000.00 $ 12,187,500.00 $ 2,437,500.00 Current stock price                     20.25                       16.57                       3.68 Issue of new shares                            -                 2,900,000            2,900,000 Existing shares            5,500,000               5,500,000                            -   Total shares            5,500,000               8,400,000            2,900,000 Earnings per share                       1.77                         1.45 0.840517241 P/E Ratio                     11.42                       11.42                            -  

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---