Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 2, Problem 5P
To determine
The financial ratio for 2018.
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A firm has net income of $134,502. There are 136,088 shares of stock outstanding at a price per share of $12.98.
The price to book ratio is 5.74 and the firm has $117,799 in total liabilities. What is the firm's price-earnings ratio?
Answer should be formatted as a number with 2 decimal places (e.g. 99.99).
Consider the following information which relates to a given company:
Item
2019 Value
Earnings Per Share
$6.43
Price Per Share (Common Stock)
$39.59
Book Value (Common Stock Equity)
$62.96
million
Total Common Stock Outstanding
2.84
million
Dividend Per Share
$3.52
Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.8% in the future, or possibly 7.79% for the next 2 years and 5.29% thereafter. In addition, it is
expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.38% to 10.52%. Currently, the risk-free rate is 5.85%.
Required: Determine the new required return for the firm's stock.
% (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)
You have obtained the following estimates from an analyst. Based on these numbers, what is the equity value of the
firm?
Value of operations: $950 million
Excess cash:
$30 million
$40 million
$30 million
Inventory:
A/P and accruals:
Short-term debt
Long-term debt:
$70 million
What is the value of equity for this firm?
$50
million
Chapter 2 Solutions
Contemporary Engineering Economics (6th Edition)
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