Smolira Golf Corp. has 20,000 shares of common stock outstanding, and the market
ID: 2616258 • Letter: S
Question
Smolira Golf Corp. has 20,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2015 was $27.
What is the price-earnings ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
What is the market-to-book ratio at the end of 2015? (Round your answer to 2 decimal places, e.g., 32.16.)
If the company’s growth rate is 10 percent, what is the PEG ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Some recent financial statements for Smolira Golf Corp. follow.
Explanation / Answer
Solution:-
a) Price- earnings ratio = 12.53 times
Calculation:-
Earnings per share= Net income / Shares
= $43,094 / 20,000
=$2.1547 per share
P/E ratio= Share market price / Earnings per share
= $27 / $2.1547
= 12.53 times
b)Dividend per share = 1.15 per share
Calculation:-
Dividends per share= Dividends / No of Shares
= $23,000 / 20,000
= $1.15 per share
c) Market to book ratio= 1.86 times
Calculation:-
Book value per share= Total equity / No of Shares
Book value per share= $290,000 / 20,000
=$14.50
Market-to-book ratio= Share market price / Book value per share
=$27/$14.50
=1.86 times
d) PEG ratio= 1.25 times
Calculations:-
PEG ratio= P/E ratio / Growth rate
= 12.53 / 10
= 1.253 times i.e. 1.25 times.
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