Calculate the new market-to-book ratio

Assignment Help Financial Management

Reference no: EM132017199

Eaton, Inc., wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $10. Net income is currently $3.2 million. The new facility will cost $50 million, and it will increase net income by $760,000. Assume a constant price-earnings ratio.

a-1. Calculate the new book value per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Book value $

a-2. Calculate the new total earnings.

Total earnings $

a-3. Calculate the new EPS. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

EPS $ per share

a-4. Calculate the new stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock price $

a-5. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your final answer to 4 decimal places, e.g., 32.1616.)

Market-to-book ratio

b. What would the new net income for the company have to be for the stock price to remain unchanged? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to nearest whole dollar amount, e.g., 32.)

Reference no: EM132017199

Questions Cloud

What is the firm cost of equity : What is the firm's cost of equity using each of these three approaches?

Accounting break-even and the cash break-even points : Calculate the accounting break-even and the cash break-even points.

The cash conversion cycle : Inventory conversion period 15 days. Inventory conversion period 55.8 days. The cash conversion cycle is.

What is holding period return : Expected dividend is $2, the initial stock price is $70 and the expected stock price 1 year from now is $75, then what is the Holding Period return?

Calculate the new market-to-book ratio : Calculate the new book value per share. Calculate the new total earnings. Calculate the new market-to-book ratio.

What is the rate of appreciation : What is the dividend yield? What is the rate of appreciation?

How does the rock cycle diagram : How does the rock cycle diagram, in particular the arrows, support the fact that sedimentary rocks are the most abundant type of rock on the surface of Earth?

Describe tectonic setting of mary peak : 1. Describe tectonic setting of Mary's peak. Be as specific and detailed as possible

Average geothermal gradient underneath continental crust : The average geothermal gradient underneath continental crust is about 20°C/km, from the surface to a depth of about 10km. From 10 to about 150 km,

User Account

All Pages