Q25BP Amigo Software Inc. has total as... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: Q25BP (page 52)

Amigo Software Inc. has total assets of $889,000, current liabilities of$192,000, and long-term liabilities of $154,000. There is $87,000 in preferredstock outstanding. Thirty thousand shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $56,300 in earnings available to common stockholders and the
firm鈥檚 stock has a P/E of 23 times earnings per share, what is the currentprice of the stock?
c. What is the ratio of market value per share to book value per share? (Round
to two places to the right of the decimal point.)

Short Answer

Expert verified

a. The book value per share is$18.10.

b. Current price of the stock is $43.24.

c. Ratio of market value per share to book value per share is 2.39.

Step by step solution

Total liability of the company

$\begin{array}{rcl} Total liability & = & Current liability - Long - term liabilities \\ = & $ 192, 000 + $ 154, 000 \\ = & $ 346, 000 \end{array}$

Book value per share of the company

$\begin{array}{rcl} Book Value per share & = & \frac{Total assets - Total liabilities}{No of shares} \\ = & \frac{$ 889, 000 - $ 346, 000}{30, 000} \\ = & $ 18.10 \end{array}$

EPS of the company

$\begin{array}{rcl} EPS & = & \frac{Earning available from shareholders}{No . of outstanding share} \\ = & \frac{$ 56, 000}{30, 000} \\ = & $ 1.88 \end{array}$

Current market price of the company

$\begin{array}{rcl} MPS & = & P / E Ratio 脳 EPS \\ = & 23 脳 $ 1.88 \\ = & $ 43.24 \end{array}$

Ratio of market value per share (MPS) to book value per share (BVPS) of the company

$\begin{array}{rcl} Ratio & = & \frac{MPS}{BVPS} \\ = & \frac{$ 43.24}{$ 18.10} \\ = & 2.39 \end{array}$

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Times mirror and glass company
Sales	\(126,000
Less: Cost of goods sold	93,000
Gross profit	\)33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\(18,000
Less: Interest expenses	3,000
Earning before taxes	\)15,000
Less: Taxes (30%)	4,500
Earning after taxes	$10,500

Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

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Short Answer

Step by step solution

Total liability of the company

Book value per share of the company

EPS of the company

Current market price of the company

Ratio of market value per share (MPS) to book value per share (BVPS) of the company

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