Stilley Corporation had earnings after taxes of $458,000 in 20X2 with 200,000 shares outstanding. The stock price was $47.10. In 20X3, earnings after taxes declined to $228,000 with the same 200,000 shares outstanding. The stock price declined to $33.30.
a. Compute earnings per share and the P/E ratio for 20X2. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Earnings per Share=
P.E. Ratio _____________ times
b. Compute earnings per share and the P/E ratio for 20X3. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Earnings per share=
P.E Ratio ____________ times
Nova Electrics anticipates cash flow from operating activities of $14 million in 20X1. It will need to spend $9.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $2.10 million and preferred stock dividends at $1.35 million.
a. What is the firm’s projected free cash flow for the year 20X1? (Enter your answer in millions of dollars rounded to 2 decimal places.)
Free cash flow= _______ million
b. What does the concept of free cash flow represent?
Free cash flow represents the funds that are available for investing activities, such as purchasing plant and equipment assets.
Free cash flow represents the funds that are available for special financing activities, such as a leveraged buyout.
Free cash flow equals cash flow from operating activities.