Enron Corporation was a worldwide energy company with annual revenues in excess of $40 billion in 1999.

Enron Corporation was a worldwide energy company with annual revenues in excess of $40 billion in 1999. Its main activities were in natural gas and electricity. Enron’s collapse was one of the most spectacular events of the recent past. Enron filed for bankruptcy protection on December 2, 2001, and 2 years later its common stock shares were trading at $.04 per share. Events surrounding Enron led to the failure of its audit firm, Arthur Andersen. The data here are from the company’s 1999 annual report ($ in millions).

1. Prepare the stockholders’ equity section of Enron’s 1999 balance sheet. Include the amount for total stockholders’ equity.
2. Enron paid $355 million of cash dividends on common stock and $66 million of cash dividends on preferred stock in 1999. Compute Enron’s net income for 1999.
3. Explain Enron’s net acquisition or disposition of treasury shares during 1999. Include the increase or decrease in total number of shares and the average cost per share of those acquired or sold. What is the average purchase price (cost) of the shares remaining in the treasury at the end of 1999?
4. Calculate book value per share at December 31, 1999, and the market-to-book ratio on that date, given a market price per share of about $45.
5. The price per share peaked in 2000 at about $91. Estimate the loss in total market value for Enron from its peak until December 2003. Assume 716 million sharesoutstanding.

Transcribed Image Text:

For the Year Ended December 31 1999 1998 70 (49) (195) 5,117 Other stockholders' equity Common stock held in treasury, 1,337,714 shares and 9,333,322 895 shares, respectively Common stock, no par value, 1,200,000,000 shares authorized, 716,865,081 shares and 671,094,552 shares issued, respectively Retained earnings Preferred stock, cumulative, no par value, 1,370,000 shares autho- 6,637 2,698 2,226 rized, 1,296,184 shares and 1,319,848 shares Issued, respectively Accumulated other comprehensive income (loss) 130 132 (741) (162)