Question

In: Accounting

The Balance sheet for a company shows a book value ofstockholders equity (book value per...

The Balance sheet for a company shows a book value of stockholders equity (book value per share x total shares outstanding) of $23,500,000. Furthermore, the firm's income statement for the year just ended has net income of $500,000, which is $0.25 per share of common stock outstanding. the P/E ratio for firm similar to this company is 20.


Q1. What price would you expect this company share to sell for

Q2. what is the book value per share for this company

Solutions

Expert Solution

Answer 1. As P/E Ratio for similar company given as 20. So P/E Ratio of this company is same as similar company that is 20.

             P/E Ratio = Market price per share / Earning per share

                 20 = Market price per share / $0.25

                 Market price per share = 20 * $ 0.25

                 Market price per share = $ 5

So the expected market price is $ 5.

Answer 2. Total shares outstanding = Total earnings / Earning per share

                                                 = $ 500,000 / $ 0.25

              Total shares outstanding = $ 2,000,000

Book value per share = Book value of stockholders equity / Total shares outstanding

                               = $ 23,500,000 / $ 2,000,000

Book value per share = $ 11.75


Related Solutions

Here are book- and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net...
Here are book- and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net working capital $ 35 Debt $ 40 Long-term assets 65 Equity 60 $ 100 $ 100 Market-Value Balance Sheet Net working capital $ 35 Debt $ 40 Long-term assets 190 Equity 185 $ 225 $ 225 Assume that MM’s theory holds except for taxes. There is no growth, and the $40 of debt is expected to be permanent. Assume a 37% corporate tax rate....
Here are book and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net...
Here are book and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net working capital $ 70 Debt $ 60 Long-term assets 30 Equity 40 $ 100 $ 100 Market-Value Balance Sheet Net working capital $ 70 Debt $ 60 Long-term assets 150 Equity 160 $ 220 $ 220 Assume that MM’s theory holds except for taxes. There is no growth, and the $60 of debt is expected to be permanent. Assume a 36% corporate tax rate....
The equity section of the balance sheet of the Guts Company on December 31, 2010 shows...
The equity section of the balance sheet of the Guts Company on December 31, 2010 shows following items: 6% Cumulative preference share capital, P100 par value (liquidation value, P115 per share); Authorized, 6,000 shares; issued, 4,000 shares; in treasury, 600 shares P400,000 Ordinary share capital, P100 par value, authorized, 20,000 shares; issued and outstanding, 8,000 shares 800,000 Share premium – preference shares 150,000 Share premium – ordinary shares 165,000 Retained earnings 458,600 Reserve for bond retirement 320,000 Treasury shares -...
what is the difference between a book-value balance sheet and a market value balance sheet? Which...
what is the difference between a book-value balance sheet and a market value balance sheet? Which provides better information to investors and management.
The total book value of WTC's equity is $13 million, and book value per share is...
The total book value of WTC's equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firms bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 6% and the firm's tax rate is 21%. What is the company's WACC? (Do not round intermediate calculations. Enter your...
XYZ Corp. reported a per share book value of $12 in its balance sheet on December...
XYZ Corp. reported a per share book value of $12 in its balance sheet on December 31, 2019. Analysts are forecasting consensus earnings per share of $1.80 for 2020 and $2.40 for 2021. The required return for common equity is 10 percent. The dividend payout is expected to be 50 percent of earnings. a) Calculate the intrinsic value per share in early 2020 with a forecast that residual earnings will grow at a long-term GDP growth rate of 4% after...
1. The total book value of WTC’s equity is $13 million, and book value per share...
1. The total book value of WTC’s equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firm’s bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 6%, and the firm’s tax rate is 40%. What is the company’s WACC? (Do not round intermediate calculations. Enter...
Here are book and market value balance sheets of the United Frypan Company. Book value balance...
Here are book and market value balance sheets of the United Frypan Company. Book value balance sheet    Net working capital 25 Debt 60 Long term assets    75    Equity 40 100    100 Market value balance sheet    Net working capital    25    debt    60 Long term assets    180 equity    145 205    205 Assume that MM's theory holds except for taxes. There is no growth, and the $60 of debt is expected to...
For which of the following balance sheet items will the book value and market value most likely be closest at the time the balance sheet is prepared?
For which of the following balance sheet items will the book value and market value most likely be closest at the time the balance sheet is prepared? Select one:  a. Long-term debt  b. Common stock  c. Net fixed assets  d. Retained earnings  e. Short-term debt
Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets...
Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $10,000,000 Notes payable 10,000,000 Fixed assets 50,000,000 Long-term debt 20,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $80,000,000 Total claims $80,000,000 The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT