Question

In: Finance

Wildcat Corporation recently disclosed the following financial​ information: ​ Earnings/revenue ​$1 comma 490 comma 549 Assets...

Wildcat Corporation recently disclosed the following financial​ information: ​

Earnings/revenue ​$1 comma 490 comma 549

Assets ​$8 comma 800 comma 000

Liabilities ​$1 comma 667 comma 480

Shares outstanding 587 comma 611

Market price ​$30.00 per share

Calculate the​ price-to-book ratio, the​ price/earnings ratio, and the book value per share for each of the following separate​ scenarios:

a. Based on current​ information, the book value per share is

​(Round to the nearest​ cent.)

Based on current​ information, the​ market-to-book (price/book) ratio is

nothing.

​(Round to two decimal​ places.)

Based on current​ information, the​ price/earnings ratio is

nothing.

​(Round to one decimal​ place.)

b. If

earnings

fall to

​$993 comma 699993,699​,

the

book value per share is

​$1.691.69.

​(Round to the nearest​ cent.)

​Note: assume this is the only change from the current information​ (part a.).

If

earnings

fall to

​$993 comma 699993,699​,

the

​market-to-book (price/book) ratio is

nothing.

​(Round to two decimal​ places.)

If

earnings

fall to

​$993 comma 699993,699​,

the

​price/earnings ratio is

nothing

. ​(Round to one decimal​ place.)

c. If liabilities increase to

​$3 comma 293 comma 0793,293,079​,

the

book value per share is

​$nothing.

​(Round to the nearest​ cent.)

​Note: assume this is the only change from the current information​ (part a.).

If liabilities increase to

​$3 comma 293 comma 0793,293,079​,

the

​market-to-book (price/book) ratio is

nothing.

​(Round to two decimal​ places.)

If liabilities increase to

​$3 comma 293 comma 0793,293,079​,

the

​price/earnings ratio is

nothing.

​ (Round to one decimal​ place.)

d. If the company does a​ three-for-one stock split with no change in market​ capitalization, the book value per share is

​$nothing.

​(Round to the nearest​ cent.)

​Note: assume this is the only change from the current information​ (part a.).

If the company does a​ three-for-one stock split with no change in market​ capitalization, the​ market-to-book (price/book) ratio is

nothing.

​(Round to two decimal​ places.)

If the company does a​ three-for-one stock split with no change in market​ capitalization, the​ price/earnings ratio is

nothing.

  ​(Round to one decimal​ place.)

e. If the company repurchases 20 percent of the outstanding​ stock, incurring additional liability to finance the​ purchase, the book value per share is

​$nothing.

​(Round to the nearest​ cent.)

​Note: assume this is the only change from the current information​ (part a.).

If the company repurchases 20 percent of the outstanding​ stock, incurring additional liability to finance the​ purchase, the​ market-to-book (price/book) ratio is

nothing.

​(Round to two decimal​ places.)

If the company repurchases 20 percent of the outstanding​ stock, incurring additional liability to finance the​ purchase, the​ price/earnings ratio is

nothing.

​ (Round to one decimal​ place.)

Solutions

Expert Solution

Earnings/revenue = ​$1,490,549

Assets =​$8,800,000

Liabilities ​=$1,667,480

Shares outstanding = 587,611

Market price ​= $30.00 per share

Book Value of Equity = Assets - Liabilities = $8,800,000 -$1,667,480 = $7,132,520

a) Book value per share = Book value of Equity/no of shares = $7132520/587611 = $12.14

market to book (price to book ratio ) = Market Price per share/book value per share

=$30/12.14 = 2.47

Price/Earnings = Market Price per share/ Earnings per share = $30/ (Total Earnings/No. of Shares)

=$30/($1490549/587611) =$30/2.536625 = 11.8

b) If earnings fall to $993,699​ , the book value per share is ​$1.69

​market-to-book (price/book) ratio =  Market Price per share/book value per share

=$30/1.69 = 17.75

Price/Earnings = Market Price per share/ Earnings per share = $30/ (Total Earnings/No. of Shares)

=$30/($993699/587611) =$30/1.691083 = 17.7

c)  If liabilities increase to ​$3,293, 079​,

Book Value of Equity = Assets - Liabilities = $8,800,000 -$3,293,079 = $5,506,921

Book value per share = Book value of Equity/no of shares = $5506921/587611 = $9.37

market to book (price to book ratio ) = Market Price per share/book value per share

=$30/9.37 = 3.20

Price/Earnings = Market Price per share/ Earnings per share = $30/ (Total Earnings/No. of Shares)

=$30/($1490549/587611) =$30/2.536625 = 11.8

d) If the company does a​ three-for-one stock split with no change in market​ capitalization, the no. of shares triple and the book value per share becomes 1/3rd, the market price also becomes 1/3rd due to increase in shares but no change in market capitalisation

Book value per share is =$12.14/3 = $4.05 per share

New Market price per share = $30/3 = $10

New Total no. of shares =587611*3 = 1762833

Market to book (price to book ratio ) = Market Price per share/book value per share

=$10/4.05 = 2.47

Price/Earnings = Market Price per share/ Earnings per share = $10/ (Total Earnings/No. of Shares)

=$10/($1490549/1762833) =$10/0.845542 = 11.8

jeff jeffy answered 1 year ago
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