Question

Some recent financial statements for Earl Grey Golf Corp. follow.

EARL GREY GOLF CORP. 2017 and 2018 Statement of Financial Position
Assets									Liabilities and Owners’ Equity
	2017				2018					2017				2018
Current assets									Current liabilities
Cash	$	21,940				24,900			Accounts payable	$	20,120			$	27,900
Accounts receivable		12,116				16,000			Notes payable		18,000				9,800
Inventory		24,234				27,900			Other		10,443				16,500
Total	$	58,290				68,800			Total	$	48,563			$	54,200
									Long-term debt	$	77,000			$	88,800
									Owners’ equity
									Common stock and paid-in surplus	$	50,000			$	50,000
									Retained earnings		124,795				238,000
Fixed assets
Net plant and equipment	$	242,068				362,200			Total	$	174,795			$	288,000
Total assets	$	300,358				431,000			Total liabilities and owners’ equity	$	300,358			$	431,000

EARL GREY GOLF CORP. 2018 Statement of Comprehensive Income
Sales				$	541,305
Cost of goods sold					256,500
Depreciation					48,400
Earnings before interest and tax				$	236,405
Interest paid					12,730
Taxable income				$	223,675
Taxes (40%)					89,470
Net income				$	134,205
Dividends	$	21,000
Additions to retained earnings		113,205

Earl Grey Golf Corp. has 30,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2018 was $24.

What is the price–earnings ratio? (Round the intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

Price–earnings ratio             times

What are the dividends per share? (Round the final answer to 2 decimal places. Omit $ sign in your response.)

Dividends           $  per share

What is the market-to-book ratio at the end of 2018? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Market-to-book ratio             times

If the company’s growth rate is 9 %, what is the PEG ratio? (Round the intermediate calculations to 2 decimal places. Round the final answer to 2 decimal places.)

PEG ratio             times

Answer 1

- Dividend per Share = Dividends/No of Shares oustanding

Dividend per Share = $21,000/30,000 shares

b). Dividend per Share = $0.70

a). P/E ratio = Market price per share/ Dividend per Share

P/E ratio = $24/$0.70

P/E ratio = 34.29 times

- Market Value of equity = No of Shares outstanding*Market price per share = 30,000 shares*$24

Market Value of equity = $720,000

c). Market-to-Book ratio at the end of 2018 = Market Value of equity/Book Value of equity

Market-to-Book ratio at the end of 2018 = $720,000/$288,000

Market-to-Book ratio at the end of 2018 = 2.5 times

d). PEG ratio = P/E ratio/Growth rate

PEG ratio = 34.29 times/9

PEG ratio = 3.81 times

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