Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 2, Problem 1P
a.
To determine
The company’s current assets, current liabilities, working capital and shareholders’ equity using the given balance sheet.
a.
Expert Solution
Explanation of Solution
The current asset is calculated as follows.
The current asset is $580,000.
The current liabilities is calculated as follows.
The current liabilities is $230,000.
The working capital is calculated as follows.
The working capital is $350,000.
The shareholders equity is calculated as follows.
The shareholders equity is $520,000.
b.
To determine
The earnings per share when the company has a net income of $500,000.
b.
Expert Solution
Explanation of Solution
The price earning per share is calculated as follows.
The price earning per share is $50.
c.
To determine
The market price of the stock when the company issues common stock.
c.
Expert Solution
Explanation of Solution
The capital surplus value is calculated as follows.
The capital surplus value is $50.
The market price of the stock is calculated as follow.
The market price of the stock is $30.
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Students have asked these similar questions
2- A rough rule of thumb for the chemical industry is that OMR 1 of annual sales required
OMR 2 of fixed capital investment. In a chemical processing plant where this rule
applies, the total capital investment is OMR 3200000 and the working capital is 18% of
the total capital investment. The annual net total product cost amounts to 1500000
OMR. If the income tax rates on gross earnings total 21%, determine the following:
(a) Percent of total capital investment returned annually as gross earning.
(b) Percent of total capital investment returned annually as net profit.
Income statements for two companies (A and B) and the income statement for the industry are
provided in the following table:
(S thousands)
Sales
Cost of goods sold
Selling, general, and
administrative
expenses
Interest expense
Pretax earnings
Taxes
Net earnings
Company A
$10,500
6,353
2,625
840
683
205
$478
Company B
$8,250
5,239
2,021
536
454
145
$309
Industry
100.0%
62.8%
24.8%
7.0%
5.4%
1.7%
3.7%
State your analysis based on the above information, which company is more competitive in the industry?
Why?
nt i
Net sales (all credit)
Less: Cost of goods sold
Gross profits
Less: Other operating expenses
EBITDA
Less: Depreciation and amortization
EBIT
Less: Interest
EBT
Less: Taxes
Net income
Determine the firm's 2021 tax liability.
Tax liability
Oakdale Fashions, Inc.'s, 2021 income statement is reported below. (Use corporate tax rate of 21 percent for your calculations.)
Oakdale Fashions, Inc., Income Statement for 2021
Determine the firm's 2021 net income.
Net income
$ 660,000
253,000
$ 407,000
128,000
$ 279,000
18,800
$ 260,200
89,500
$ 170,700
$
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Chapter 2 Solutions
Contemporary Engineering Economics (6th Edition)
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