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I am Lyosha [343]
3 years ago
12

A company reported net income of $6 million. During the year the average number of common shares outstanding was 3 million. The

price of a share of common stock at the end of the year was $5. There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative. The EPS is approximately: a.$0.40. b.$1.76. c.$1.86. d.$2.00. The Price/Earnings ratio is approximately: a.2.00. b,2.50. c,2.84. d.12.50. Price to Earnings Ratio (P/E): The price to earnings ratio (P/E) is used a relative valuation or multiple for shares of stock. The multiple is based on earnings per share (EPS). So, if a company has a PE ratio of 2, it means the share price is trading at 2 times earnings. If the PE ratio is 20, it means the share price is trading at 20 times earnings. Since earnings are earnings, the PE ratio acts like a price tag. Some companies have a higher share price for the same level of earnings. Why
Business
1 answer:
malfutka [58]3 years ago
7 0

Answer:

The EPS is approximately:

it can be any of them:

  • if preferred dividends = $4,800,000, then EPS = $0.40 (option A)
  • if preferred dividends = $720,000, then EPS = $1.76 (option B)
  • if preferred dividends = $0, then EPS = $2 (option D)

EPS = (net income - preferred dividends) / outstanding shares = ($6,000,000 - preferred dividends) / 3,000,000 shares

The Price/Earnings ratio is approximately:

  • if EPS = $0.40, then PE ratio = 12.5 (option D)
  • if EPS = $1.76, then PE ratio = 2.84 (option C)
  • if EPS = $2, then PE ratio = 2.5 (option B)

Price/earnings (PE) ratio = share price / EPS = $5 / EPS

EPS cannot be $1.80, since PE ratio = 2.78 and that is not an option.

Some companies have a higher share price for the same level of earnings. Why?

Some stocks like Amazon have a very low EPS, form any years its EPS was very low bu its stock price kept rising. The stock price is based mostly on potential future earnings, not current earnings. A company that is being liquidated might have a high EPS, but a very low stock price since it will stop operating soon.  

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The correct answer is D. Assign appropriate, but differing, discount rates to each project and then select the projects with the highest net present values.

Explanation:

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The discount rate is the inverse of the interest rate, which serves to increase the value (or add interest) in the present money. The discount rate, on the other hand, detracts from the future money when it is transferred to the present, except if the discount rate is negative, in case it will mean that the future money is worth more than the current one. The interest rate is used to obtain the increase to an original amount, while the discount rate is subtracted from an expected amount to obtain an amount in the present.

Except in exceptional cases, the discount rate is positive because before the promise of receiving money in the future we have the uncertainty of whether we will receive it or not, since there may be a problem that prevents us from receiving that money. Therefore, the farther the money we are going to receive, the less it will be worth now.

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Ray Wilson is Quality Manager of the Tiffin, Ohio, plant of North-West Electric, a manufacturer of electrical components. Some N
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Answer:

North-West Electric

Quality Department

If Ray decided to delayer his organization, what he would be doing is:

a. Reducing the number of job levels to achieve flexibility in assignments.

Explanation:

Delayering helps to cut some management layers from the organizational structure.  It reduces the administrative costs of running the entire organization.  Delayering helps the organization to make quicker decisions instead of following bureaucratic processes.  It also increases the effectiveness and efficiency of the organization.  Finally, it enables the staff to become more flexible and willing to step outside their established roles.

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What aspects of managing your account were probably more difficult before online banking was available?
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One of the main advantages of online banking is that you can access information about your account immediately and from anywhere. Before online accounts were available, you had to go to a bank or ATM on some specific cases if you wanted to carry out any type of transaction, e.g. pay a service or transfer money. Online accounts make it less likely for a person to go to a bank, e.g. in order to get a loan, I did it all online, I didn't even need to go to the bank.

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3 years ago
A company wishes to raise $170 million by issuing 20-year annual coupon bonds. Each bond will have a face value of $1,000; coupo
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Answer:

The answer to the question is B I51,753 bonds

Explanation:

The present price of the bond and the total amount to be raised of $170m were used in arriving at the number of bonds to be issued.

n 20  

Coupon 6.60%  

YTM 7.7%*1000=77  

FV 1000  

PV ($1,120.25)  

The current price of the bond   $1,120.25  

Total amount to be raised   $170,000,000  

Number of bonds to be issued=total amount /bond price    151,752 approx...151753

Find attached spreadsheet with formulas so as to be able to follow through.

Download xlsx
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