The Holtzman Corporation has assets of $410,000, current liabilities of $69,000, and long-term liabilities of $89,000....
The Holtzman Corporation has assets of $410,000, current
liabilities of $69,000, and long-term liabilities of $89,000. There
is $37,500 in preferred stock outstanding; 20,000 shares of common
stock have been issued.
a. Compute book value (net worth) per share.
(Round your answer to 2 decimal places.)
b. If there is $33,600 in earnings available to
common stockholders, and Holtzman’s stock has a P/E of 22 times
earnings per share, what is the current price of the stock?
(Do not round intermediate calculations. Round your final
answer to 2 decimal places.)
c. What is the ratio of market value per share to
book value per share? (Do not round intermediate
calculations. Round your final answer to 2 decimal places.)
Homework Answers
| a. | ||
| Total stockholders' equity = Total assets - Current liabilities - Long term liabilities = 410000 - 69000 - 89000 | 252000 | |
| Book value per share = ( Total stockholders' equity - Preferred stock ) / Shares of common stock outstanding = ( 252000 - 37500 ) / 20000 | 10.73 | |
| b. | ||
| Earnings per share = Earnings available to common stockholders / Shares of common stock outstanding = 33600 / 20000 | 1.68 | |
| P/E ratio = Current stock price / Earnings per share | ||
| 22 = Current stock price / 1.68 | ||
| Current stock price = 22 * 1.68 | 36.96 | |
| c. | ||
| Market value to book value = Current stock price / Book value per share = 36.96 / 10.73 | 3.44 | times |
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