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ollegr [7]
3 years ago
9

Cute Camel Woodcraft Company just reported earnings after tax (also called net income) of $9,750,000 and a current stock price o

f $39.50 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,900,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,400,000)
If Cute Camel's forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does the company's management expect its stock price to be one year from now?
(Note: Round any EPS calculations to two decimal places, and round any P/E ratio calculation to four decimal places.)
a. $32.36 per share
b. $39.50 per share
c. $24.27 per share
d. $40.45 per share
One year later, Cute Camel's shares are trading at $47.12 per share, and the company reports the value of its total common equity as $54,364,800. Given this information, Cute Camel's market-to-book (M/B) ratio is ____.
Is it possible for a company to exhibit a negative EPS and thus a negative P/E ratio?
a. No
b. Yes
Business
1 answer:
Assoli18 [71]3 years ago
7 0

Answer:

Explanation:

a)

earning per share =  Net income / outstanding shares  

= $9,750,000 / 5,500,000  = $1.77

price earning ratio = Current stock price \  earning per share

= $39.50 \ $1.77  = 22.32

new Earning per share = Net income / outstanding shares

= $9,750,000 * 125% / 8,400,000  = $1.45

the stock price after one year would be

= Price earning ratio * New earning per share  = 22.32 * $1.45  = $32.36

b)

Market to book ratio = Market value/ book value  

Market value = Share price * number of outstanding shares

= $47.12 * 8,400,000 shares  = $395,808,000

book value is $54,364,800

M/B = $395,808,000 / $54,364,800  = 7.28 times

Is it possible for a company to exhibit a negative EPS and thus a negative P/E ratio?

Yes, if company is having losses

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Cellular Talk is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 25% a ye
kondaur [170]

Answer:

$12.14

Explanation:

The computation of the current value of one share of the stock is shown below:

D2 = (1 × 1.25) = $1.25

D3 = (1.25 × 1.25) = $1.5625

Now

Value after year 3 is

= (D3 × Growth rate) ÷ (Required return - Growth rate)

= (($1.5625 × 1.06) ÷ [0.17 - 0.06)]

= $15.05681818

Now

Current value is

= Future dividends × Present value of discounting factor(17%,time period)

= $1 ÷ 1.17 + $1.25 ÷ 1.17^2 + $1.5625 ÷ 1.17^3 + $15.05681818/1.17^3

= $12.14

7 0
2 years ago
Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserv
sergey [27]

Answer:

hmmmmmmmmmmmmm

Explanation:

4 0
3 years ago
What is the future value of an annuity due that pays $550 per year for 18 years? Use an annual interest rate of 8.00%.
OverLord2011 [107]

Answer:

$22,245.44

Explanation:

For computing the future value we need to apply the future value which is to be shown in the attachment below:

Provided that,  

Present value = $0

Rate of interest = 8%

NPER = 18 years

PMT = $550

The formula is shown below:

= -FV(Rate;NPER;PMT;PV;type)

So, after  applying the above formula, the future value is $22,245.44

4 0
3 years ago
The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are $270,000. Determ
MrRissso [65]

Answer

(a) 3858 Units

(b) 4372 Units

Explanation

SP = Selling price per unit = $150 per unit

VC = Variable cost per unit = $80 per  unit

TFC = Total Fixed Cost = $270,000

(a) Break-Even Point (Units) = Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)

= $270,000 ÷ ( $150 per unit - $80 per  unit )

= 3857.14 ≅ 3858 Units

(b)

x = Number of units

TR = Total Revenue = $150x

TC = Total Costs = Total Fixed Cost + Total Variable Cost

TC = $270,000 + $80x

Target Profit = $36,000

Total profit = Total Revenue - Total Costs

36000 = 150x - ( 270000 + 80x)

306000 = 70x

x = 4371.42 ≅ 4372 Units

3 0
3 years ago
The balance of stockholder's equity at the beginning of the year and the end of the year was 70,000 and 60,000, respectively. Th
ivann1987 [24]

Answer: 12,000

Explanation:

Given that,

Stockholder's equity at the beginning of the year = 70,000

Stockholder's equity at the end of the year = 60,000

Dividends = 22,000

Net Income = Ending Balance + Dividends - Beginning Balance

                    = 60,000 + 22,000 - 70,000

                    = 12,000

Therefore, the net income for the year was 12,000.

6 0
3 years ago
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