Homework Help is Here – Start Your Trial Now!
Business
Accounting
Financial Learning Systems has 1.7 million shares of common stock outstanding and 97,218 shares of preferred stock.​ (The preferred pays annual cash dividends of ​$5.02 a​ share, and the common pays annual cash dividends of 26 cents a​ share.) Last​ year, the company generated net profit​ (after taxes) of $7,076,423. The​ company's balance sheet shows total assets of ​$80 ​million, total liabilities of $36

Financial Learning Systems has 1.7 million shares of common stock outstanding and 97,218 shares of preferred stock.​ (The preferred pays annual cash dividends of ​$5.02 a​ share, and the common pays annual cash dividends of 26 cents a​ share.) Last​ year, the company generated net profit​ (after taxes) of $7,076,423. The​ company's balance sheet shows total assets of ​$80 ​million, total liabilities of $36

Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter12: Statement Of Stockholders’ Equity (stockeq)
Section: Chapter Questions
Problem 1R: Chen Corporation began 2012 with the following stockholders equity balances: The following selected...
See similar textbooks
icon
Related questions
Question
100%
Financial Learning Systems has
1.7
million shares of common stock outstanding and
97,218
shares of preferred stock.​ (The preferred pays annual cash dividends of
​$5.02
a​ share, and the common pays annual cash dividends of
26
cents a​ share.) Last​ year, the company generated net profit​ (after taxes) of
$7,076,423.
The​ company's balance sheet shows total assets of
​$80
​million, total liabilities of
$36
​million, and
$5
million in preferred stock. The​ firm's common stock is currently trading in the market at
​$40.57
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
​$5.85
and the​ P/E ratio stays where it​ is? What will happen if EPS drops to
​$2.32
and the​ P/E doesn't​ change?
c. What will happen to the price of the stock if EPS rises to
​$5.85
and the​ P/E jumps to
14.8
times​ earnings?
d. What will happen if both EPS and the​ P/E ratio
drop—to
​$2.32
and
5.7
times​ earnings, respectively?
e. Comment on the effect that EPS and the​ P/E ratio have on the market price of the stock.
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Earning per share and Dilutive securities
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS