The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $64,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2019.
The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $64,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2019.
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter3: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 19SP
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The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $64,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the
| Balance Sheet, Dec 31, | ||||||
| 2019 | 2018 | |||||
| Cash | $ | 356,000 | $ | 116,000 | ||
| $ | 366,000 | $ | 416,000 | |||
| Inventory | $ | 266,000 | $ | 316,000 | ||
| Total Current Assets | $ | 988,000 | $ | 848,000 | ||
| Long-lived Assets | 1,240,000 | 1,260,000 | ||||
| Total Assets | $ | 2,228,000 | $ | 2,108,000 | ||
| Current Liabilities | $ | 216,000 | $ | 316,000 | ||
| Long-term Debt | 616,000 | 516,000 | ||||
| Shareholder Equity | 1,396,000 | 1,276,000 | ||||
| Total Debt and Equity | $ | 2,228,000 | $ | 2,108,000 | ||
| Income Statement, for year ended Dec 31, | ||||||
| 2019 | 2018 | |||||
| Sales | $ | 4,830,000 | $ | 4,580,000 | ||
| Cost of Sales | 4,164,000 | 4,064,000 | ||||
| Gross Margin | 666,000 | 516,000 | ||||
| Operating Expenses | 358,000 | 408,000 | ||||
| Operating Income | 308,000 | 108,000 | ||||
| Taxes | 123,200 | 43,200 | ||||
| Net Income | $ | 184,800 | $ | 64,800 | ||
| Cash Flow From Operations | 2019 | 2018 | |||||
| Net Income | $ | 184,800 | $ | 64,800 | |||
| Plus Depreciation Expense | 50,000 | 50,000 | |||||
| + Decrease (-inc) in AccRec. and Inv. | 100,000 | - | |||||
| + Increase (-dec) in Cur. Liabl. | (100,000 | ) | - | ||||
| Cash Flow from Operations | $ | 234,800 | $ | 114,800 | |||
The
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3.8
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1.9
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4.6
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1.7
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