Electro Wizard Company produces a popular video game called Destructo which sell
ID: 2701537 • Letter: E
Question
Electro Wizard Company produces a popular video game called Destructo which sells for $32. Last year ElectroWizard sold 50,000 Destructo games, each of which costs $6 to produce. Electro Wizard incurred selling and administrative expenses of $80,000 and depreciation expense of $10,000. In addition, Electro Wizard has a $100,000 loan outstanding at 12%. Their tax rate is 40%. There are 100,000 common shares outstanding. Show and explain all work.
Prepare an income statement for Electro Wizard in good form and include earnings per share (EPS)
Explanation / Answer
Total revenue .....$1600000
Expenditure....300000+80000+10000+1200%u2026 =$402000
Profits before tax = $1198000
tax deducted/paid = $479200
profit after tax = net income = $718800
EPS = 7.188
next
YTM/coupon rate =face value/market price
here, 9/7 = 1000/market price
so, market price is 7000/9 = $777
( compounding is taken care by YTM calculations)
If the yield to maturity for a bond is less than the bond's coupon rate, then the (clean) market value of the bond is greater than the par value (and vice versa).
If a bond's coupon rate is less than its YTM, then the bond is selling at a discount.
If a bond's coupon rate is more than its YTM, then the bond is selling at a premium.
If a bond's coupon rate is equal to its YTM, then the bond is selling at par.
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