Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

 

Balance Sheet (Millions of $) 2021
Assets  
Cash and securities   $ 4,200  
Accounts receivable     17,500  
Inventories     20,300  
Total current assets   $ 42,000  
Net plant and equipment     28,000  
Total assets   $ 70,000  
 
Liabilities and Equity  
Accounts payable   $ 27,531  
Accruals     12,369  
Notes payable     5,000  
Total current liabilities   $ 44,900  
Long-term bonds     9,000  
Total liabilities   $ 53,900  
Common stock     3,864  
Retained earnings     12,236  
Total common equity   $ 16,100  
Total liabilities and equity   $ 70,000  
 
Income Statement (Millions of $) 2021
Net sales   $ 112,000  
Operating costs except depreciation     104,160  
Depreciation     2,240  
Earnings before interest and taxes (EBIT)   $ 5,600  
Less interest     840  
Earnings before taxes (EBT)   $ 4,760  
Taxes (25%)     1,190  
Net income   $ 3,570  
 
Other data:  
Shares outstanding (millions)     500.00  
Common dividends (millions of $)   $1,249.50  
Int. rate on notes payable & L-T bonds     6%  
Federal plus state income tax rate     25%  
Year-end stock price     $85.68  

 

What is the firm's equity multiplier? Do not round your intermediate calculations.

a. 5.72  
  b. 2.61  
  c. 2.79  
  d. 4.35  
  e. 3.35

Please show calculations and explain as well.

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