1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
zaharov [31]
3 years ago
6

Wayne, Inc., wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sell

s for $40 per share, but the book value per share is $10. Net income is currently $4 million. The new facility will cost $50 million, and it will increase net income by $820,000. Assume a constant price-earnings ratio.
a-1. Calculate the new book value per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a-2. Calculate the new EPS. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
a-3. Calculate the new stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a-4. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
b. What would the new net income for the company have to be for the stock price to remain unchanged? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
Business
1 answer:
kompoz [17]3 years ago
4 0

Answer:

a-1. Calculate the new book value per share.

current book value = stocks outstanding x book value = 5,000,000 x $10 = $50,000,000

new book value = $50,000,000 + $50,000,000 = $100,000,000

new stocks issued = $50,000,000 / $40 = 1,250,000

total stocks outstanding = 5,000,000 + 1,250,000 = 6,250,000

new book value per stock = $100,000,000 / 6,250,000 = $16

a-2. Calculate the new EPS.

old EPS = $4,000,000 / 5,000,000 = $0.80 per stock

new EPS = $4,850,000 / 6,250,000 = $0.776 per stock

a-3. Calculate the new stock price.

price to earnings ratio = $40 / $0.80 = 50

new stock price:

50 = new stock price / $0.776

new stock price = 50 x $0.776 = $38.80

a-4. Calculate the new market-to-book ratio.

market to book ratio = market capitalization / book value = $242,500,000 / $100,000,000 = 2.425

b. What would the new net income for the company have to be for the stock price to remain unchanged?

0.8 = net income / 6,250,000

net income = 6,250,000 x 0.8 = $5,000,000

You might be interested in
Is ben afflecks wife the jennifer garner who does the capital one commercials?
kotegsom [21]
Yes she is !!!!!!!!!!!!!
5 0
3 years ago
The Fraser Hill Inn 3 a charming Bed & Breakfast localed in Fraser Hill, Pahang outside of Kuala Lumpur. Fraser Hill is well
Damm [24]

Answer:

wow great story I love it

6 0
2 years ago
Read 2 more answers
While packing an item what size packaging material should be used
In-s [12.5K]

Answer:

box

Explanation:

because large box have a lot of space

8 0
2 years ago
Bob, a bartender who saw duty in Vietnam, refuses to serve Asians in his bar because he believes that Asians have no business li
photoshop1234 [79]
His memories from time in Vietnam
8 0
2 years ago
A company had inventory on July 1 of 5 units at a cost of $16 each. On July 2, they purchased 9 units at $28 each. On July 6 the
yarga [219]

Answer:

$248

Explanation:

The LIFO inventory method implies that the inventory that was purchased last would be the first to be sold.

Here, we would compute the inventory units as seen below;

= 5 units + 9 units + 5 units - 8 units

= 11 units

Now, the value of inventory is;

= 5 units × $16 + 6 units × $28

= $80 + $168

= $248.

The 6 units come from

= 11 units - 5 units

= 6 units.

Therefore, the value of inventory is $248.

7 0
2 years ago
Other questions:
  • Consider a household consisting of four college friends. The friends have made a commitment to live together for the next five y
    11·1 answer
  • Swan song is a spa that caters to the needs of small percentage of highly health conscious consumers. It offers state-of-the-art
    6·1 answer
  • Which of the scenarios are examples of free-riding?
    13·1 answer
  • The lazy-boy furniture company collects information about a wide variety of competitive, economic, political, legal and regulato
    11·1 answer
  • Which of the following statements is correct?
    7·1 answer
  • XYZ Company produces a significant daily amount of electronic waste. The company disposes the waste into the ocean despite stric
    10·1 answer
  • Quadcopters plans to sell a standard quadcopter ​(toy drone) for $ 55 and a deluxe quadcopter for $ 85. Funtime purchases the st
    12·1 answer
  • For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance.
    6·1 answer
  • Manufacturers use several different production processes to create goods and services.
    10·1 answer
  • The wall separating Henri from his manager made it hard to hear what his manager was saying. The wall is an example of a(n) ____
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!