The Holtzman Corporation has assets of $414,000, current liabilities of $72,000,
ID: 2801781 • Letter: T
Question
The Holtzman Corporation has assets of $414,000, current liabilities of $72,000, and long-term liabilities of $134,000. There is $32,600 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a. Compute book value (net worth) per share. (Round your answer to 2 decimal places.)
b. If there is $34,400 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 16 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Explanation / Answer
a) Equity = Assets - Current Liabilities - Long-term liabilities - Preferred Stock
= 414,000 - 72,000 - 134,000 - 32,600
= 175,400
Book Value per share = 175,400 / 20,000 = $8.77
b) Earnings per share = Earnings / No. of shares = 34,400 / 20,000 = $1.72
Current Price = P/E x EPS = 1.72 x 16 = $27.52
c) Market Value to Book Value = 27.52 / 8.77 = 3.14
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