Financial Learning Systems has 2.7 million shares of common stockoutstanding and 128,743 shares of preferred stock. (The preferred paysannual cash dividends of $4.28 a share, and the common pays annualcash dividends of 25 cents a share.) Last year, the company generatednet profit (after taxes) of $7,557,145. The company's balance sheetshows total assets of $84 million, total liabilities of $34 million, and $6million in preferred stock. The firm's common stock is currently tradingin the market at $46.98 a share.a. Given the preceding information, find the EPS, P/E ratio, and bookvalue per share.b. What will happen to the price of the stock if EPS rises to $3.95 andthe P/E ratio stays where it is? What will happen if EPS drops to $1.44and the P/E doesn't change?c. What will happen to the price of the stock if EPS rises to $3.95 andthe P/E jumps to 25.7 times earnings?d. What will happen if both EPS and the P/E ratio drop-to $1.44 and10.5 times earnings, respectively?e. Comment on the effect that EPS and the P/E ratio have on themarket price of the stock.

Here, Number of Preferred Stock 128,743Annual Cash Preference Dividend per share $…

Answered: Financial Learning Systems has 2.7…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A firm had the following financials last year: Sales Revenue = $3,060Accounts receivable = $500Interest expense = $126Total operating expenses = $600Accounts payable = $240Cost of goods sold = $1,800Dividend on preferred stock = $18Tax rate = 40% Number of outstanding number of common shares = 1,000 The E.P.S of the firm, rounded to four decimal places is
Futuristic Development (FD) generated $2 million in sales last year with assets equal to $5 million. The firm operated at full capacity last year. According to FD's balance sheet, the only current liabilities are accounts payable, which equals $460,000. The only other liability is long-term debt, which equals $730,000. The common equity section is comprised of 500,000 shares of common stock with a book value equal to $3 million and $810,000 of retained earnings. Next year, FD expects its sales will increase by 22 percent. The company's net profit margin is expected to remain at its current level, which is 16 percent of sales. FD plans to pay dividends equal to $0.60 per share. It also plans to issue 70,000 shares of new common stock, which will raise $460,000. Estimate the additional funds needed (AFN) to achieve the forecasted sales next year. Round your answer to the nearest dollar.
Errol Corporation earned net income of $200,000 this year. The company began the year with 10,000 shares of common stock and issued 5,000 more on April 1. They issued $7,500 in preferred dividends for the year. What is the numerator of the EPS calculation for Errol?
Hendo Inc. is constructing its pro forma financial statements for this year. At years end, Assets were $650,000 and Accounts Payable (the only liabilities account) was $175,000. Sales for the year were $825,000. Hendo expects to grow by 12% this year. Assets and Accounts Payable are expected to grow proportionally to Sales. Common Stock currently equals $175,000 and Retained Earnings are $127,000. Hendo plans to sell $18,000 of new common stock this year. The firm's profit margin on Sales is 5.5%, and 45% of its earnings will be paid out in dividends. How much NEW long-term debt financing will Hendo need this year to finance its expected growth? Hendo is currently operating at full capapcity.
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During Year 3, Solomon Corporation reported after-tax net income of $3,635,000. During the year, the number of shares of stock outstanding remained constant at 9,540 of $100 par, 10 percent preferred stock and 397,000 shares of common stock. The company's total stockholders' equity is $19,500,000 at December 31, Year 3. Solomon Corporation's common stock was selling at $53 per share at the end of its fiscal year. All dividends for the year have been paid, including $4.80 per share to common stockholders. Required a. Compute the earnings per share. (Round your answer to 2 decimal places.) b. Compute the book value per share of common stock. (Round your answer to 2 decimal places.) e. Compute the price-earnings ratio. (Round intermediate calculations and final answer to 2 decimal places.) d. Compute the dividend yield. (Round your percentage answer to 2 decimal places (i.e., 0.2345 should be entered as 23.45)) a Eamings per share b. Book value per share e. Price eamings ratio a. Dividend…
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