| Determine the maximum price you would pay for a share of common stock in Roscovis if you have the following investment constraints: |
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Maximum Price/Earnings Ratio |
15 X |
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Maximum Multiple of Book Value |
3 X |
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Minimum Dividend Yield |
3% |
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Preferred stock, $100 par value, callable at 105, 4%,
cumulative, 200,000 shares authorized, 50,000
shares issued and outstanding |
$ 5,000,000 |
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Common stock, $2 par value, 1,000,000 shares
authorized, 400,000 shares issued and outstanding |
800,000 |
$ 5,800,000 |
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Additional paid-in capital: |
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Paid-in capital in excess of par -- preferred stock |
$ 50,000 |
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Paid-in capital in excess of par -- common stock |
4,000,000 |
4,050,000 |
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Total paid-in capital |
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$ 9,850,000 |
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Retained earnings |
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7,400,000 |
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Total stockholders' equity |
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$ 17,250,000 |
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