The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $67,200 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 1,600,000 shares of outstanding stock at the end of 2019. Balance Sheet, Dec 31, 2019 2018 Cash $ 364,000 $ 124,000 Accounts Receivable $ 374,000 $ 424,000 Inventory $ 274,000 $ 324,000 Total Current Assets $ 1,012,000 $ 872,000 Long-lived Assets 1,320,000 1,340,000 Total Assets $ 2,332,000 $ 2,212,000 Current Liabilities $ 224,000 $ 324,000 Long-term Debt 624,000 524,000 Shareholder Equity 1,484,000 1,364,000 Total Debt and Equity $ 2,332,000 $ 2,212,000 Income Statement, for year ended Dec 31, 2019 2018 Sales $ 4,870,000 $ 4,620,000 Cost of Sales 4,196,000 4,096,000 Gross Margin 674,000 524,000 Operating Expenses 362,000 412,000 Operating Income 312,000 112,000 Taxes 124,800 44,800 Net Income $ 187,200 $ 67,200 Cash Flow From Operations 2019 2018 Net Income $ 187,200 $ 67,200 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 $ 237,200 $ 117,200 The market value of the company's equity for 2019 is: Multiple Choice $11,200,000 $5,695,000 $5,320,000 $9,925,000

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 $67,200 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 1,600,000 shares of outstanding stock at the end of 2019.

Balance Sheet, Dec 31,
	2019	2018
Cash	$	364,000	$	124,000
Accounts Receivable	$	374,000	$	424,000
Inventory	$	274,000	$	324,000
Total Current Assets	$	1,012,000	$	872,000
Long-lived Assets		1,320,000		1,340,000
Total Assets	$	2,332,000	$	2,212,000
Current Liabilities	$	224,000	$	324,000
Long-term Debt		624,000		524,000
Shareholder Equity		1,484,000		1,364,000
Total Debt and Equity	$	2,332,000	$	2,212,000

Income Statement, for year ended Dec 31,
	2019	2018
Sales	$	4,870,000	$	4,620,000
Cost of Sales		4,196,000		4,096,000
Gross Margin		674,000		524,000
Operating Expenses		362,000		412,000
Operating Income		312,000		112,000
Taxes		124,800		44,800
Net Income	$	187,200	$	67,200

Cash Flow From Operations	2019		2018
Net Income	$	187,200		$	67,200
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	$	237,200		$	117,200

The market value of the company's equity for 2019 is:

Multiple Choice

$11,200,000
$5,695,000
$5,320,000
$9,925,000
$4,420,000

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