Price/Earnings Ratio and Income Statement for Hunting Pack Systems
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You manufacture hunting pack systems in China for 80 dollars each, including shipping. The manufacturing costs only include variable costs. You sell these packs to retailers for 200 dollars each. In the current year you will sell 100,000 packs. Your fixed costs including such items as insurance, marketing, travel, shows, office supplies, warehouse rentals etc. totals 5 million dollars this year. The federal income tax rate for your company is 40 percent.
Your company is publicly traded on the NASDAQ with 1,000,000 shares outstanding.
1 Create a current income statement using the same format as found in the lecture.
2 Calculate earnings per share.
3. Calculate the price/earnings ratio (the PE ratio) assuming that the current stock price is 10 dollars per share.
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Solution Summary
This provides the steps to calculate the price/earnings ratio in an attached Excel file.
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