Wayne, Inc., wishes to expand its facilities. The company currently has 5 million shares outstanding and...

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Finance

Wayne, Inc., wishes to expand its facilities. The companycurrently has 5 million shares outstanding and no debt. The stocksells for $36 per share, but the book value per share is $10. Netincome is currently $3 million. The new facility will cost $45million, and it will increase net income by $660,000. Assume aconstant price-earnings ratio.
a-1.
Calculate the new book value per share. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
a-2. Calculate the new EPS. (Do not round intermediatecalculations and round your answer to 4 decimal places, e.g.,32.1616.)
a-3. Calculate the new stock price. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
a-4. Calculate the new market-to-book ratio. (Do not roundintermediate calculations and round your answer to 4 decimalplaces, e.g., 32.1616.)
b. What would the new net income for the company have to be forthe stock price to remain unchanged? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to the nearest whole dollar amount,e.g., 1,234,567.)

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3.9 Ratings (771 Votes)

Wayne has 5000000 shares outstanding and wishes to add a facility for 45000000 at a price of 36 Therefore number of shares added is 1250000 45000000 36 Total number of shares outstanding now is 5000000 1250000 6250000 New book value per share See Answer

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Wayne, Inc., wishes to expand its facilities. The companycurrently has 5 million shares outstanding and no debt. The stocksells for $36 per share, but the book value per share is $10. Netincome is currently $3 million. The new facility will cost $45million, and it will increase net income by $660,000. Assume aconstant price-earnings ratio.a-1.Calculate the new book value per share. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)a-2.Calculate the new EPS. (Do not round intermediatecalculations and round your answer to 4 decimal places, e.g.,32.1616.)a-3.Calculate the new stock price. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)a-4.Calculate the new market-to-book ratio. (Do not roundintermediate calculations and round your answer to 4 decimalplaces, e.g., 32.1616.)b.What would the new net income for the company have to be forthe stock price to remain unchanged? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to the nearest whole dollar amount,e.g., 1,234,567.)

a-1.	Calculate the new book value per share. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
a-2.	Calculate the new EPS. (Do not round intermediatecalculations and round your answer to 4 decimal places, e.g.,32.1616.)
a-3.	Calculate the new stock price. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)
a-4.	Calculate the new market-to-book ratio. (Do not roundintermediate calculations and round your answer to 4 decimalplaces, e.g., 32.1616.)
b.	What would the new net income for the company have to be forthe stock price to remain unchanged? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to the nearest whole dollar amount,e.g., 1,234,567.)