Thomuy weekly Schèdule C Coinbase Khan Academy KQuestion 6(of 6) value: 10.00 po

Question

Thomuy weekly Schèdule C Coinbase Khan Academy KQuestion 6(of 6) value: 10.00 points Problem 2-16 Phelps Labs has assets of $444,000, current liabilities of $51,000, and long-term liabilities of $71000. There is $35,500 in preferred stock outstanding: 20,000 shares of common stock have been issued. a. Compute book value (net worth) per share. (Round the final answer to 2 decimal places.) Book value per share b. If there is $25,700 in earnings available to common shareholders and Phelp's stock has a P/E ratio of 19 times EPS, what is the current price of the final answer to 2 decimal places.) ound Current price c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round the final answer to 2 decimal places) Ratio Worksheet Problem 2-16 Learning Objective: 02-03 Examine the i sheet as a measure of a firms financial jp 19

Explanation / Answer

a ANS)

Net worth or shareholders equity = Total assets - Total liabilities

= $ 4,44,000 - ($51,000 + $71,000)

= $ 3,22,000

Book Value of share = Total shareholders equity - Preferred stock / Number of shares of common stock

= $ 3,22,000-$ 35,500/ 20,000 shares

= $ 14.33

b ANS)

Earnings per share = Earnings available to common shareholders / Number of shares

= $ 25,700 / 20,000 shares

= $ 1.285

Price earnings ratio = Market value per share / Earnings per share

19 = Market value per share / $1.285

Market value per share = 19 * $1.285

= $ 24.42

c ANS) Ratio = Market value per share / Book value per share

= $ 24.42 / $ 14.33

= 1.7 : 1

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