The balance sheet and income statement shown below are for OLD Inc. Note that th

Question

The balance sheet and income statement shown below are for OLD 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 (in millions)
Assets
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 (in millions):
Net sales 87,500
Operating costs expect depreciation 81,813
Depreciation 1,531
EBIT 4,156
Less Interest 1,375
EBT 2,781
Taxes 973
net Income 1,808

Other Data:
Shares outstanding (millions) 500
Common dividends $632.73
Int rate on notes payable & LT bonds 6.25%
Federal plus state income tax rate 35%
Year-end stock price $43.39


1. What’s the firm’s Dividends per share?
2. What’s the firm’s EPS?
3. What’s the firm’s P/E ratio?
4. What’s the firm’s Book Value per share?
5. What’s the firm’s Market to book ratio?
6. What’s the firm’s equity multipliers?

Explanation / Answer

1) Dividend per share = Dividends over a period of 1yr / No. of shares outstanding
                                = $632.73 / 500                                
                                = 1.26

2) The firm's EPS is calculated as

               EPS = Net income/ Number of outstanding shares
                     = $1,808/500                      = $3.616

3)             P/E ratio = Current market price per share / EPS
                               = $43.39 / $3.616
                               = 11.99 times

4) Book value per share = Equity / Number of shares outstanding
                                   = $13000/ 500
                                   = $26 per share

5) Market-to-book ratio = market value per share / Book value per share
                                   = $43.39 / $26
                                   = 1.668 times

6) Equity multilplier = Total assets / Total equity
                              = $50,000 / $13,000
                              = 3.846 times

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