Question

The Holtzman Corporation has assets of $384,000, current liabilities of $54,000, and long-term liabilities of $79,000. There is $36,800 in preferred stock outstanding; 20,000 shares of common stock have been issued.

a. Compute book value (net worth) per share. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Book value per share $

b. If there is $33,600 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 22 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Current price $

c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Answer 1

The book value per share for Holtzman Corporation is $10.71. The current price of the stock, with a P/E ratio of 22 and earnings of $33,600 for common stockholders, is $36.96. The market to book ratio is therefore 3.45.

Step-by-step explanation:

To calculate the book value per share, we subtract the total liabilities from the total assets and then subtract the preferred stock. This gives us the equity available to common stockholders. We then divide this figure by the total number of common shares issued.

Holtzman Corporation equity for common stockholders: $384,000 - $54,000 - $79,000 - $36,800 = $214,200

Book value per share: $214,200 / 20,000 = $10.71

To determine the current price of the stock, we calculate the earnings per share (EPS) by dividing the earnings available to common stockholders by the number of shares. Then, we multiply the EPS by the P/E ratio.

Earnings per share: $33,600 / 20,000 = $1.68

Current price of the stock: $1.68 ×22 = $36.96

Finally, the ratio of market value per share to book value per share is computed by dividing the current price of the stock by the book value per share.

Market to book ratio: $36.96 / $10.71 = 3.45

Answer 2

A. $10.71

B.$36.96

C. 3.45 times

Step-by-step explanation:

The Holtzman Corporation

A.

Total assets $384,000

Less:current liabilities ($54,000)

long-term liabilities of ($79,000)

Stock holder equity $251,000

Less preferred stock( $36,800)

Net worth assigned to common $214,200

Common shares outstanding $20,000

Book value per share (Net worth) per share $10.71

Book value per share = $214,200/$20,000

= $10.71

B. Earnings per share = Earnings available to common stockholders /Numbers of shares

$33,600/$20,000

=$1.68

Price =P/E×EPS

22×$1.68

=$36.96

C. Market value per share to book value per share

$36.96/$10.71

3.45 times