2A2W BULL & BEAR INVESTMENT BANKING IS WORKING WITH THE MANAGEMEN...

72.

CSO: 2A2e

LOS: 2A2w

Bull & Bear Investment Banking is working with the management of Clark Inc. in order

to take the company public in an initial public offering. Selected financial information

for Clark 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 Clark’s industry are trading at twelve times earnings, what is the

estimated value per share of Clark?

a.

$9.00.

b.

$12.00.

c.

$15.00.

d.

$24.00.