HELP FOR EXAM QUICK! Please refer to Table 4minus1 for the following questions.
ID: 2730911 • Letter: H
Question
HELP FOR EXAM QUICK!
Please refer to Table 4minus1 for the following questions. Table 4minus1 Stewart Company Balance Sheet Assets: Cash and marketable securities $600,000 Accounts receivable 900,000 Inventories 1,500,000 Prepaid expenses 75,000 Total current assets $3,075,000 Fixed assets 8,000,000 Less: accum. depr. (2,075,000) Net fixed assets $5,925,000 Total assets $9,000,000 Liabilities: Accounts payable $800,000 Notes payable 700,000 Accrued taxes 50,000 Total current liabilities $1,550,000 Longminusterm debt 2,500,000 Owner's equity (1 million shares of common stock outstanding) 4,950,000 Total liabilities and owner's equity $9,000,000 Net sales (all credit) $10,000,000 Less: Cost of goods sold (3,000,000) Selling and administrative expense (2,000,000) Depreciation expense (250,000) Interest expense (200,000) Earnings before taxes 4,550,000 Income taxes (1,820,000) Net income $2,730,000 Based on the information in Table 4minus1, and assuming the company's stock price is $30 per share, the P/E ratio is
A. 10.99 B9.85 C.4.83 D 3.09
Explanation / Answer
PE ratio = MPS/EPS
= 30/2.73 i.e 10.99
Particulars Amount Sales 10000000 Less:Cost of goods sold 3000000 Gross Profit 7000000 Less: Selling and administrative expenses 2000000 Less:Depreciation Expense 250000 EBIT 4750000 Less: Interest 200000 EBT 4550000 Less:Taxes 1820000 Earning for equity 2730000 Number of equity shares 1000000 Earning per share 2.73Related Questions
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