Problem 1
The Rockford Corporation has assets of $418,000, current liabilities of $126,000, and long-term liabilities of $131,000. There is $38,700 in preferred stock outstanding; 20,000 shares of common stock have been issued.
(a) Compute book value (net worth) per share.
Book value per share $
(b) If there is $32,300 in earnings available to common stockholders and Rockford's stock has a P/E of 21 times earnings per share, what is the current price of the stock?
Current price $
(c) What is the ratio of market value per share to book value per share?
Ratio
Problem 2
Amigo Software, Inc., has total assets of $820,000, current liabilities of $181,000, and long-term liabilities of $210,000. There is $90,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.
(a) Compute book value (net worth) per share.
Book value per share $
(b) If there is $52,800 in earnings available to common stockholders and the firm's stock has a P/E of 26 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "tiny_mce_markerquot; sign in your response.)
Current price $
(c) What is the ratio of market value per share to book value per share?
Ratio
Problem 3
On December 31, 2009, the balance sheet of Baxter Corporation was as follows:
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Current Assets
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Liabilities
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Cash
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$
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13,000
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Accounts payable
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$
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15,000
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Accounts receivable
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18,000
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Notes payable
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23,000
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Inventory
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28,000
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Bonds payable
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53,000
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Prepaid expenses
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12,300
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Fixed Assets
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Stockholders' Equity
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Plant and equipment (gross)
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$
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253,000
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Preferred stock
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$
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23,000
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Less: Accumulated depreciation
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50,600
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Common stock
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58,000
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Paid-in capital
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28,000
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Net plant and equipment
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202,400
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Retained earnings
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73,700
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Total assets
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$
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273,700
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Total liabilities and stockholders' equity
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$
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273,700
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Sales for 2010 were $235,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $23,500. Depreciation expense was 11 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 9 percent, while the interest rate on the bonds payable was 15 percent. This interest expense is based on December 31, 2009, balances. The tax rate averaged 20 percent.
$2,300 in preferred stock dividends were paid and $9,560 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.
During 2010, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 9 percent. A new machine was purchased on December 31, 2010, at a cost of $38,000.
Accounts payable increased by 35 percent. Notes payable increased $6,300 and bonds payable decreased $11,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.
(a) Prepare an income statement for 2010.
(b) Prepare a statement of retained earnings for 2010.
(c) Prepare a balance sheet as of December 31, 2010.