Based on the info

INCOME STATEMENT S Sales Cost of Goods Sold Gross Profit 5,234,198 3,659,135 1,575,063 Selling Expense General & Administrative Depreciation Bank Interest on Loan Total Operating Expense 227,295 626,000 176,000 147,500 1,176,795 Operating Profit Less Income Tax (25%) Net Profit after Tax 398,268 99,567 298,701 Dividends Paid (100k shares) 100,000 BALANCE SHEET $ S Cash Accounts Receivable Inventory 165,852 Accounts Payable 589,367 Long-Term Debt 1,765,129 496,231 2,950,000 Plant & Equipment Less Depreciation Net Plant & Equipment 5,500,000 Common Stock 1,100,000 Retained Earnings 4,400,000 Total Equity 2,000,000 1,474,117 3,474,117 S 6.920,348 Total Assets $ 6,920,348 Total Liability & Equity Current Share price for 100,000 shares issued: $25 Value 1. Use the financial statements above to calculate the following measures: Measure Formula 1. Current Ratio Current assets / current liabilities 2. Debt to Equity Ratio Total debt / total equity 3. Gross Margin Gross profit / sales 4. Return on Sales (ROS) Net profit / sales 5. Return on Equity (ROE) Net profit/ total equity 6. Earnings per Share (EPS) Net profit/ shares outstanding 7. Price Earnings Ratio (PE) Share Price / EPS Calculate the value of this business using the following simplified (rule of thumb) measures: Measure Formula Value 1. Cash Flow 3 x(Net Profit + Depreciation + Bank Interest) 2. Earnings Multiplier 5 x EPS x Shares Outstanding 3. Market Value Share price x Shares Outstanding 4. Book Value Assets - Liabilities How can you explain the differences in the valuation of the business? Which makes the most sense to you