Question

You are given the following information for Smashville, Inc.  

Cost of goods sold:	$	169,000
Investment income:	$	1,300
Net sales:	$	282,000
Operating expense:	$	44,000
Interest expense:	$	7,400
Dividends:	$	5,000
Tax rate:		30	%

Current liabilities:	$	22,000
Cash:	$	21,000
Long-term debt:	$	92,000
Other assets:	$	37,000
Fixed assets:	$	120,000
Other liabilities:	$	6,000
Investments:	$	33,000
Operating assets:	$	64,000

During the year, Smashville, Inc., had 20,000 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.)

Price Book Ratio_____

Price Earning ______

Price cash flow _____

Answer 1

The book value per share, earnings per share, and cash flow per share are computed as follows:

The Net Income is computed as shown below:

= [Net Sales + Investment income - Cost of goods sold - Operating expenses - Interest expense] x ( 1 - tax rate )

= [$ 282,000 + $ 1,300 - $ 169,000 - $ 44,000 - $ 7,400] x ( 1 - tax rate )

= $ 62,900 x 0.70

= $ 44,030

The Book Value is computed as shown below:

= Assets - Liabilities

= [ Cash + Other assets + Fixed assets + Investments + Operating Assets ] - [ Current liabilities + Long term debt + Other liabilities ]

= [ $ 21,000 + $ 37,000 + $ 120,000 + $ 33,000 + $ 64,000] - [ $ 22,000 + $ 92,000 + $ 6,000 ]

= $ 155,000

The cash flow is computed as follows:

= Net Income + Depreciation

= $ 44,030 + $ 15,000

= $ 59,030

So the book value per share will be:

= $ 155,000 / 20,000

= $ 7.75

So the earnings per share will be:

= $ 44,030 / 20,000

= $ 2.20

So the cash flow per share will be:

= $ 59,030 / 20,000

= $ 2.95

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