Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc
ID: 2726470 • Letter: E
Question
Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.
2012
$ 2,500
11,500
16,000
$30,000
$20,000
$50,000
$ 9,500
7,000
5,500
$22,000
$15,000
$37,000
$ 2,000
11,000
$13,000
$50,000
2012
$87,500
81,813
1,531
$ 4,156
1,375
$ 2,781
973
$ 1,808
500.00
$632.73
6.25%
35%
$43.39
Refer to Exhibit 4.1. What is the firm's book value per share?
$27.30
$22.29
$24.70
$26.00
$23.47
Balance Sheet (Millions of $) Assets2012
Cash and securities$ 2,500
Accounts receivable11,500
Inventories16,000
Total current assets$30,000
Net plant and equipment$20,000
Total assets$50,000
Liabilities and Equity Accounts payable$ 9,500
Notes payable7,000
Accruals5,500
Total current liabilities$22,000
Long-term bonds$15,000
Total debt$37,000
Common stock$ 2,000
Retained earnings11,000
Total common equity$13,000
Total liabilities and equity$50,000
Income Statement (Millions of $)2012
Net sales$87,500
Operating costs except depreciation81,813
Depreciation1,531
Earnings bef interest and taxes (EBIT)$ 4,156
Less interest1,375
Earnings before taxes (EBT)$ 2,781
Taxes973
Net income$ 1,808
Other data: Shares outstanding (millions)500.00
Common dividends$632.73
Int rate on notes payable & L-T bonds6.25%
Federal plus state income tax rate35%
Year-end stock price$43.39
Explanation / Answer
Book value per share = Total equity/Number of shares
= $13,000/500
= $26
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