Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please develop the calculation In Excel, Thank you P7.9-Financial Learning Systems has 2.6million shares of common stock outstanding and 74 comma 908 shares of preferred

Please develop the calculation In Excel, Thank you

P7.9-Financial Learning Systems has 2.6million shares of common stock outstanding and

74 comma 908 shares of preferred stock. (The preferred pays annual cash dividends of

$5.63 a share, and the common pays annual cash dividends of 33 cents a share.) Last year, the company generated net profit (after taxes) of $ 6 comma 709 comma 324.

The company's balance sheet shows total assets of $71 million, total liabilities of $ 29 million, and $ 4 million in preferred stock. The firm's common stock is currently trading in the market at

$53.59 a share.

a. Given the preceding information, find the EPS, P/E ratio, and book value per share.

b. What will happen to the price of the stock if EPS rises to $3.65 and the P/E ratio stays where it is? What will happen if EPS drops to $1.54 and the P/E doesn't change?

c. What will happen to the price of the stock if EPS rises to $3.65 and the P/E jumps to 31.4 times earnings?

d. What will happen if both EPS and the P/E ratio droplong dash to $1.54 and 11.4 times earnings, respectively?

e. Comment on the effect that EPS and the P/E ratio have on the market price of the stock.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Concepts and Applications

Authors: Stephen Foerster

1st edition

013293664X, 978-0132936644

More Books

Students also viewed these Finance questions