arker, Incorporated, wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $53. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. The par value of the stock is $1 per share. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. Assume the stock price is constant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Calculate the new total earnings. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a-3. Calculate the new EPS. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a-4. Calculate the new stock price. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-5. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What would the new net income for the company have to be for the stock price to remain unchange
arker, Incorporated, wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $53. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. The par value of the stock is $1 per share. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. Assume the stock price is constant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Calculate the new total earnings. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a-3. Calculate the new EPS. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a-4. Calculate the new stock price. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-5. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What would the new net income for the company have to be for the stock price to remain unchange
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 8M
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Marker, Incorporated, wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $53. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. The par value of the stock is $1 per share. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. Assume the stock price is constant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Calculate the new total earnings. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a-3. Calculate the new EPS. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a-4. Calculate the new stock price. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-5. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What would the new net income for the company have to be for the stock price to remain unchanged?
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