Question

Refer to the following financial statements for Crosby Corporation CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2 3,900,000 2,470,000 1,430,000 618,000 290,000 522,000 es Cost of goods sold Selling and administrative expense Depreciation expense Operating income Interest expense 434,900 127,000 307,900 10,000 297,900 Eamings before taxes Taxes Eamings after taxes Preferred stock dividends Earnings available to common stockholders Shares outstanding Earnings per share Statement of Retained Earnings For the Year Ended December 31, 20X2 Retained earnings, balance, January 1, 20X2 $1,079,600 297,900 170,000 $1,207,500 Add: Earnings available to common stockholders, 20X2 Deduct: Cash dividends declared and paid in 20X2 Retained earnings, balance, December 31, 20X2 Comparative Balance Sheets For 20X1 and 20X2 Year-End Current assets $ 102,000 507,000 698,000 60,300 $ 1,367,300 97,000 $48,500 Accounts receivable (net) Inventory Prepaid expenses 754,000 37,900 $ 1,440,400 Total current assets Investments (long-term securities) Gross plant and equipment Less: Accumulated depreciation Net plant and equipment $2,630,000 1,370,000 $3,280,000 1,00040001620,000 1,260,000 $2,724,300 Total assets $ 3,148,500 Liabilities and Stockholders' Equity Current liabilities: Accounts payable tes payable Accrued expenses Total current liabilities 553,000 75,700 949,700 553,000 53,000 $ 1,189,000 Long-term liabilities Bonds payable, 20X2 Total liabilities 105,000 $1,054,700 162,000 $1,351,000 Stockholders' equity: Preferred stock, $100 par value Common stock, $1 par value Capital paid in excess of par Retained earnings Total stockholders' equity 90,000 150,000 150,000 350,000 1,079,600 1,207,500 $ 1,797,500 $ 3,148,500 Total liabilities and stockholders' equity $2,724,300

Answer 1

b)20x1=(total equity-preferred stock)/common shares outstanding
=(1669600-10000)/150000
=11.06
20x2=(1797500-10000)/150000
=11.92

c) market value=3.3 times book value 20x1=3.3*11.06=36.50
PE ration in 20x2=market price/EPS in 20x2
=36.50/1.99
=18.34