Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF COR

Question

Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF CORP. 2014 and 2015 Balance Sheets Assets Liabilities and Owners’ Equity 2014 2015 2014 2015 Current assets Current liabilities Cash $ 24,226 $ 25,900 Accounts payable $ 24,984 $ 28,900 Accounts receivable 14,248 17,000 Notes payable 17,000 12,600 Inventory 27,802 28,900 Other 13,371 17,500 Total $ 66,276 $ 71,800 Total $ 55,355 $ 59,000 Long-term debt $ 124,000 $ 132,000 Owners’ equity Common stock and paid-in surplus $ 60,000 $ 60,000 Accumulated retained earnings 169,616 185,000 Fixed assets Net plant and equipment $ 342,695 $ 364,200 Total $ 229,616 $ 245,000 Total assets $ 408,971 $ 436,000 Total liabilities and owners’ equity $ 408,971 $ 436,000

SMOLIRA GOLF CORP. 2015 Income Statement Sales $ 390,477 Cost of goods sold 261,500 Depreciation 50,900 Earnings before interest and taxes $ 78,077 Interest paid 16,100 Taxable income $ 61,977 Taxes (30%) 18,593 Net income $ 43,384 Dividends $ 28,000 Retained earnings 15,384

Smolira Golf Corp. has 35,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2015 was $23.

What is the price-earnings ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

What are the dividends per share? (Round your answer to 2 decimal places, e.g., 32.16.)

What is the market-to-book ratio at the end of 2015? (Round your answer to 2 decimal places, e.g., 32.16.)

If the company’s growth rate is 9 percent, what is the PEG ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

1. Price Earnings Ratio = Share Price / Earnings Per Share

Earnings Per Share = Net Income / Shares Outstanding

Earnings Per Share = $43384 / 35000

Earnings Per Share = $1.24 Per Share

Share Price = $23

Price Earnings Ratio = Share Price / Earnings Per Share

Price Earnings Ratio = $23 / $1.24

Price Earnings Ratio = 18.55 Times

2. Computation of Dividends per share

Dividends Per Share = Total Dividends / Total Shares O/s

Dividends Per Share = 28000 / 35000

Dividends Per Share = $0.80 per share

3. Market to Book Ratio

Market to Book Ratio = Market Price / Book Value per share

Market to Book Ratio = ($23 / $245000) * 35000

Market to Book Ratio = 3.29 times

4. PEG Ratio = PE Ratio / Growth Rate

PEG Ratio = 18.55 / 9

PEG Ratio = 2.06 times

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