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Q33 The Harrison Bicycle Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $120,000

Q33

The Harrison Bicycle Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $120,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2021 was $14.20 and $12.50 in 2022. Also in 2022, the industry average earnings multiple for the bicycle industry was 8 and the free cash flow and sales multiples were 16 and 1.35, respectively. The company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2022.

Balance Sheet, December 31,
2022 2021
Cash $ 276,000 $ 109,000
Accounts Receivable $ 534,000 $ 409,000
Inventory $ 459,000 $ 309,000
Total Current Assets $ 1,269,000 $ 827,000
Long-lived Assets 1,250,000 1,145,000
Total Assets $ 2,519,000 $ 1,972,000
Current Liabilities $ 509,000 $ 309,000
Long-term Debt 690,000 590,000
Shareholder Equity 1,320,000 1,073,000
Total Debt and Equity $ 2,519,000 $ 1,972,000

Income Statement, for year ended December 31,
2022 2021
Sales $ 6,200,000 $ 5,420,000
Cost of Sales 5,095,000 4,390,000
Gross Margin 1,105,000 1,030,000
Operating Expenses 510,000 450,000
Operating Income 595,000 580,000
Taxes 228,000 198,000
Net Income $ 367,000 $ 382,000

Cash Flow From Operations 2022 2021
Net Income $ 367,000 $ 382,000
Plus Depreciation Expense 125,000 125,000
+ Decrease (-increase) in Account Receivable and Inventory (275,000) 0
+ Increase (-decrease) in Current Liabilities 200,000 0
Cash Flow from Operations $ 417,000 $ 507,000

The book value of the company's equity for 2022 is:

Multiple Choice

  • $1,320,000

  • $1,045,000

  • $1,593,000

  • $2,493,000

  • $8,356,500

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