Problem
Given is the Income Statement for the year ended December 31, 2010, Statement of Retained Earnings for the year ended December 31, 2010 and Comparative Balance Sheets for 2009 and 2010 of Jeter Corporation:
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JETER CORPORATION
Income Statement
For the Year Ended December 31, 2010
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Sales
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$
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4,190,000
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Cost of goods sold
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2,820,000
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Gross profits
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1,370,000
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Selling and administrative expense
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685,000
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Depreciation expense
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319,000
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Operating income
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366,000
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Interest expense
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89,300
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Earnings before taxes
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276,700
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Taxes
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227,000
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Earnings after taxes
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49,700
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Preferred stock dividends
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10,000
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Earnings available to common stockholders
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$
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39,700
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Shares outstanding
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150,000
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Earnings per share
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$
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.26
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Statement of Retained Earnings
For the Year Ended December 31, 2010
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Retained earnings, balance, January 1, 2010
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$
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45,900
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Add: Earnings available to common stockholders, 2010
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39,700
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Deduct: Cash dividends declared and paid in 2010
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25,000
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Retained earnings, balance, December 31, 2010
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$
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60,600
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Comparative Balance Sheets
For 2009 and 2010
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Year-End
2009
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Year-End
2010
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Assets
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Current assets:
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Cash
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$
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173,000
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$
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60,000
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Accounts receivable (net)
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549,000
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573,000
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Inventory
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645,000
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686,000
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Prepaid expenses
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61,600
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37,800
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Total current assets
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1,428,600
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1,356,800
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Investments (long-term securities)
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90,100
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84,700
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Plant and equipment
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2,240,000
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2,930,000
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Less: Accumulated depreciation
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1,990,000
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2,309,000
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Net plant and equipment
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250,000
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621,000
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Total assets
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$
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1,768,700
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$
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2,062,500
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Liabilities and Stockholders' Equity
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Current liabilities:
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Accounts payable
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$
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307,000
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$
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555,000
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Notes payable
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558,000
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558,000
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Accrued expenses
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72,800
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50,900
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Total current liabilities
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937,800
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1,163,900
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Long-term liabilities:
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Bonds payable, 2015
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195,000
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248,000
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Total liabilities
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1,132,800
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1,411,900
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Stockholders' equity:
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Preferred stock, $100 par value
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90,000
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90,000
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Common stock, $1 par value
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150,000
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150,000
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Capital paid in excess of par
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350,000
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350,000
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Retained earnings
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45,900
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60,600
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Total stockholders' equity
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635,900
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650,600
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Total liabilities and stockholders' equity
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$
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1,768,700
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$
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2,062,500
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If the market value of a share of common stock is 3.2 times book value for 2010, what is the firm's P/E ratio for 2010?
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