Smolira Golf Corp. has 25,000 shares of common stock outstanding, and the market
ID: 2764672 • Letter: S
Question
Smolira Golf Corp. has 25,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2015 was $52.
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 7 percent, what is the PEG ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
SMOLIRA GOLF CORP.
2014 and 2015 Balance Sheets Assets Liabilities and Owners’ Equity 2014 2015 2014 2015 Current assets Current liabilities Cash $ 23,046 $ 25,100 Accounts payable $ 24,184 $ 28,100 Accounts receivable 13,448 16,200 Notes payable 20,000 11,800 Inventory 26,822 28,100 Other 12,571 19,100 Total $ 63,316 $ 69,400 Total $ 56,755 $ 59,000 Long-term debt $ 79,000 $ 90,000 Owners’ equity Common stock and paid-in surplus $ 48,000 $ 48,000 Accumulated retained earnings 214,256 237,000 Fixed assets Net plant and equipment $ 334,695 $ 364,600 Total $ 262,256 $ 285,000 Total assets $ 398,011 $ 434,000 Total liabilities and owners’ equity $ 398,011 $ 434,000
Explanation / Answer
Price Earnings RAtio = MArket value price per share/Earnings per share
Earnings per share = Net income - preferred dvidend /weighted average ccommon shares outstanding
EPS = 42744-0/25000 = $1.71
Price Earnings ratio = 52/1.71 =30.40 times
2) Dvidend per share = Dividend /Number of shares
Dividend per share = 20000/25000 = $0.8 per share
3) Market to book ratio = Shareprice /book value per share
Book VAlue per share = total Assets - total liabilities = 434000-149000 = 285000/25000 =$ 11.4
MArket to book value = 52/11.4 = 4.56 times
4) PEG ratio = PE / expected growth rate
= 30.40/0.07 = 434 times
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