Approximately, what is the premium investors have paid (total dollar amount and

Question

Approximately, what is the premium investors have paid (total dollar amount and per share) to purchase the ZEBRA’ common stock?

ZEBRA CORPORATION Income Statement Gross Sales Returns and allowances Net Profit Cost of goods sold Gross Profit Advertising expense lease payment Depreciation Management salary expense Repairs and maintence costs R&D; expense Operating Income Other Income Earnings Before Interest and Taxes Interest expense Pretax Income Taxes 3,210,000 -48,000 3,162,000 2,433,000 729,000 78,000 -52,000 -78,000 240,000 22,000 -35,000 224,000 224,000 -64,000 160,000 -51,000 109,000 Net Income

Explanation / Answer

The premium investors have paid to purchase the ZEBRA’ common stock = Market price per share - Book value per share The premium investors have paid to purchase the ZEBRA’ common stock (per share) = $5 - $1.91 = $3.09 per share The premium investors have paid to purchase the ZEBRA’ common stock = No.of share outstanding * (Market price per share - Book value per share) The premium investors have paid to purchase the ZEBRA’ common stock (total dollar amount) = 120000 shares * $3.09 per share = $3,70,800

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