Question
In: Finance
You are given the following information for Smashville, Inc. Cost of goods sold: $224,000 Investment income:...
You are given the following information for Smashville, Inc.
| Cost of goods sold: | $224,000 | |
| Investment income: | $2,400 | |
| Net sales: | $389,000 | |
| Operating expense: | $90,000 | |
| Interest expense: | $7,400 | |
| Dividends: | $15,000 | |
| Tax rate: | 21 | % |
| Current liabilities: | $24,000 |
| Cash: | $21,000 |
| Long-term debt: | $24,000 |
| Other assets: | $40,000 |
| Fixed assets: | $136,000 |
| Other liabilities: | $5,000 |
| Investments: | $44,000 |
| Operating assets: | $37,000 |
During the year, Smashville, Inc., had 24,000 shares of stock outstanding and depreciation expense of $15,000. Calculate the book value per share, earnings per share, and cash flow per share. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Solutions
Expert Solution
Solution :-
Net income
= [(Net sales + investment income) - (cost of goods sold + operating expense + interest expense)] x (1 - tax rate)
= [($389000 + $2400) - ($224000 + $90000 + $7400)] x (1 - 0.21)
= [$391400 - $321400] x 0.79
= $70000 x 0.79 = $55300
Book value
= (Cash + Other assets + Fixed assets + Investments + Operating assets) - (Current liabilities + Long term debt + Other liabilities)
= ($21000 + $40000 + $136000 + $44000 + $37000) - ($24000 + $24000 + $5000)
= $278000 - $53000 = $225000
Now,
Book value per share = Book value/shares outstanding
= $225000/24000 shares = $9.38 per share
Earnings per share = Net income/shares outstanding
= $55300/24000 shares = $2.30 per share
Cash flow per share = (Net income + Depreciation expense)/shares outstanding
= ($55300 + $15000)/24000 shares
= $70300/24000 shares = $2.93
Note: It is assumed that depreciation expense is included in the operating expense.
jeff jeffy answered 2 years agoRelated Solutions
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21,000
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