Harris Shipping Company has excess cash of $300,000 and 200,000 total shares outstanding. The firm...
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Finance
Harris Shipping Company has excess cash of $300,000 and 200,000 total shares outstanding. The firm pays no dividends and its net income for the year just ended is $100,000. The market value balance sheet at the end of the year is shown below. Assume that the entire amount of excess cash will be utilized for share repurchase at the current market price. Calculate the price-earnings ratio after the repurchase.
| Market Value Balance Sheet | |||||||||||
| (before paying out excess cash) | |||||||||||
| Excess Cash | $ | 300,000 | Debt | $ | 0 | ||||||
| Other Assets | $ | 900,000 | Equity | $ | 1,200,000 | ||||||
| Total | $ | 1,200,000 | Total | $ | 1,200,000 | ||||||
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