QUESTIONS 79 THROUGH 90 RELATE TO EQUITY INVESTMENTS

83. The annual report of a company as at the end of its first year of its operation

contains the following data:

Common stock $0.50 par value – Authorized (2,500,000 shares) $ 1,250,000

– Issued (2,000,000 shares) $ 1,000,000

Additional paid-in-capital $10,000,000

Retained earnings $ 4,000,000

Current price per share $30

The company’s ending inventories using LIFO are valued at $1,500,000 and a

footnote to financial statements reports inventories valued using FIFO would be

$1,900,000. The company’s tax rate is 30 percent. The FIFO adjusted price-to-

book value of the company is closest to:

A. 3.93.

B. 4.00.

C. 4.08.