Personal Finance 1st Edition by Jack R. Kapoor

Exercise 31

Calculating Earnings per Share, Price-Earnings Ratio, and Book Value. As a stockholder of Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $9 million, liabilities of $5 million, after-tax earnings of $2 million, and 750,000 outstanding shares of common stock. (Obj. 3)

a. Calculate the earnings per share of Bozo Oil’s common stock.

---

b. Assuming a share of Bozo Oil’s common stock has a market value of $40, what is the firm’s price-earnings ratio?

---

c. Calculate the book value of a share of Bozo Oil’s common stock.

Step 1 of 3

Information extracted from annual report is

The Assets are $9 million

The Liabilities are $5 million

After-tax earnings are $2 million

The Number of shares outstanding is 750,000

a) Earnings per share:

The formula for earnings per share is:

Substitute the values in the formula:

The Earnings per share is $2.67