Calculate the new stock price on these general accounting question Eaton, Inc., wishes to expand its facilities. The companycurrently has 5 million shares outstanding and no debt. Thestock sells for $36 per share, but the book value per share is$8. The net income is currently $4 million. The new facility willcost $45 million, and it will increase net income by $800,000.Assume a constant price-earnings ratio.Calculate the new stock price.

Step 1: Define Earnings Per ShareThe ratio of the net income available to equity shareholders…

Answered: Eaton, Inc., wishes to expand its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? The stock price should be $ (Round to the nearest cent.) A b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cont.) c. Assume you bought Covan stock at the beginning of…
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