The Holtzman Corporation has assets of $386,000, current liabilities of $49,000,
ID: 398092 • Letter: T
Question
The Holtzman Corporation has assets of $386,000, current liabilities of $49,000, and long-term liabilities of $110,000. There is $31,100 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a. Compute book value (net worth) per share. (Round your answer to 2 decimal places.)
b. If there is $32,000 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 24 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Book value per share $Explanation / Answer
Ans:
a) Book value = $9.795
Book value per share = (Total common shareholders equity - preferred stock) / number of common shares
Total common shareholders equity = Assets - Liabilities
= $386,000 - $49,000 - $110,000
= $227000
Book value per share = ($227,000 - $31,100) / 20,000
= $195,900 / 20,000
= $9.795
b) current price = $38.4
Earnings per share(EPS) = earnings available to common stockholders / common shares
= $32,000 / 20,000
= $1.6
current price = P/E ratio * EPS
= 24 * $1.6
= $38.4
c) market value to book value = 3.92 times
market value to book value ratio = market value / book value
= $38.4 / $9.795
= 3.92 times
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