Determine what is the fair market value of one share

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Reference no: EM132472615

Question A) Based on the following information, what would be missing from the balance sheet for BCD Company. BDC Company, Year xxx1, December 31 (keep in mind that some of the items on the balance sheet might need to be calculated based on the information below)

Cash                                                     4,000

Patents                                                82,000

Accounts payable                                     6,000

Accounts receivable                                 8,000

Taxes payable                                         2,000

Machinery                                             34,000

Bonds payable                                       30,000

Accumulated retained earnings                  6,000

Capital surplus (additional paid-in capital)  39,000

Question B) Based on the following information what would be the NIAT for BCD Company in Year XXX2.

Assume the tax rate is 25 percent.

Selling, general, and administrative expenses     10,000

Sales                                                         55,000

Cost of goods sold                                       20,000

Interest expense                                         3,000

Depreciation                                                3,000

Question C) If the current earnings of the BCD Company are expected to continue into the indefinite future (no growth in earnings is expected - ever), and the company pays 100% of net income in dividends. What is the market value of the company's equity? Assume that the required return on equity is 7.00%.

Question D) Using your result from above, what is the fair market value of one share of BCD stock? The par value of BCD stock is $0.75 (this is to calculate the number of shares outstanding).

Reference no: EM132472615

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