Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc

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.

Balance Sheet (Millions of $) Assets 2012 Cash and securities $ 2,500 Accounts receivable 11,500 Inventories 16,000 Total current assets $30,000 Net plant and equipment $20,000 Total assets $50,000 Liabilities and Equity Accounts payable $ 9,500 Notes payable 7,000 Accruals     5,500 Total current liabilities $22,000 Long-term bonds $15,000 Total debt $37,000 Common stock $ 2,000 Retained earnings 11,000 Total common equity $13,000 Total liabilities and equity $50,000 Income Statement (Millions of $) 2012 Net sales $87,500 Operating costs except depreciation 81,813 Depreciation     1,531 Earnings bef interest and taxes (EBIT) $ 4,156 Less interest     1,375 Earnings before taxes (EBT) $ 2,781 Taxes        973 Net income $ 1,808 Other data: Shares outstanding (millions) 500.00 Common dividends $632.73 Int rate on notes payable & L-T bonds 6.25% Federal plus state income tax rate 35% Year-end stock price $43.39

Refer to Exhibit 4.1. What is the firm's P/E ratio?      12.0      12.6      13.2      13.9      14.6 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 12.0 12.6 13.2 13.9 14.6 Balance Sheet (Millions of $) Assets 2012 Cash and securities $ 2,500 Accounts receivable 11,500 Inventories 16,000 Total current assets $30,000 Net plant and equipment $20,000 Total assets $50,000 Liabilities and Equity Accounts payable $ 9,500 Notes payable 7,000 Accruals     5,500 Total current liabilities $22,000 Long-term bonds $15,000 Total debt $37,000 Common stock $ 2,000 Retained earnings 11,000 Total common equity $13,000 Total liabilities and equity $50,000 Income Statement (Millions of $) 2012 Net sales $87,500 Operating costs except depreciation 81,813 Depreciation     1,531 Earnings bef interest and taxes (EBIT) $ 4,156 Less interest     1,375 Earnings before taxes (EBT) $ 2,781 Taxes        973 Net income $ 1,808 Other data: Shares outstanding (millions) 500.00 Common dividends $632.73 Int rate on notes payable & L-T bonds 6.25% Federal plus state income tax rate 35% Year-end stock price $43.39

Explanation / Answer

P/E = Price per share/Eaarning per share = 12

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