a. What was Free Enterprises book value (net worth) at the beginning of 2016?

b. If the company had 750,000 shares of common stock authorized and 500,000 shares outstanding, what was the book value per share of common stock at the beginning of 2016?

c. Net income of Free Enterprise, Inc. was $5,610,000 in 2015. Calculate the earnings per share of Free Enterprises common stock.

d. The P/E ratio for a typical company in Free Enterprise, Inc.s industry is estimated to be 6. Using the EPS from part c) above, calculate the price of one share of common stock at the beginning of 2016, assuming that Free Enterprise commands a P/E ratio value equal to that of an average company in its industry.

e. What would you infer about the companys total assets shown on the balance sheet when comparing this calculated stock price with the companys book value per share?

f. Calculate the liquidation value of Free Enterprises common stock assuming the market value of the total assets is $50 million and the market value of total liabilities is $20 million, as estimated by your analyst.

8) Lucky Jackson is trying to choose from among the best of the three investment alternatives recommended to him by his full-service investment broker. The alternatives are a. The corporate bond of Star Mining Company has a face value of $1,000 and an annual coupon interest rate of 13 percent. The bond is selling in the market at $1,147.58. Of the original 20 years to maturity, only 16 years of the life of the bond remain.

b. The preferred stock of Supernova Minerals Company has a par value of $100 per share and it offers an annual dividend of $14 per share. The market price of the stock is $140 per share.

c. The common stock of White Dwarf Ores Company sells in the market at $300 per share. The company paid a dividend of $39 per share yesterday. The company is expected to grow at 3 percent per annum in the future. Which of the three alternatives should Lucky choose? Remember the priority of claims for bondholders, preferred stockholders, and common stockholders from Chapters 1 and 4.

Which of the three alternatives should Lucky choose? Remember the priority of claims for bondholders, preferred stockholders, and common stockholders from Chapters 1 and 4.

Free Enterprise, Inc., Balance Sheet December 31, 2015 (thousands of dollars) Liabilities Equity Assets 4,000 Cash Accounts Payable 10,000 Notes Payable Accounts Receivable 13,000 Inventory Accrued Expenses 400 Prepaid Expenses Total Current Liabilities Total Current Assets 27,400 Bonds Payable 11,000 Fixed Assets Common Equity 38,400 Total Assets Total Liabilities Equity 4,400 4,000 5,000 13,400 6,000 19,000 38,400