2A2S MORTON STARLEY INVESTMENT BANKING IS WORKING WITH THE MANAGEMENT...
73.
CSO: 2A2e
LOS: 2A2s
Morton Starley Investment Banking is working with the management of Kell Inc. in order
to take the company public in an initial public offering. Selected information for the year
just ended for Kell is as follows.
Long-term debt (8% interest rate)
$10,000,000
Common equity:
Par value ($1 per share)
3,000,000
Additional paid-in-capital
24,000,000
Retained earnings
6,000,000
Total assets
55,000,000
Net income
3,750,000
Dividend (annual)
1,500,000
If public companies in Kell’s industry are trading at a market to book ratio of 1.5, what is
the estimated value per share of Kell?
a.
$13.50.
b.
$16.50.
c.
$21.50.
d.
$27.50.