Vollmer, Inc. had reported the following balances:
December 31, 2019 December 31, 2018
Net Income \( 80,000 \) 60,000
Preferred Dividends 2,000 5,000
Total Stockholders’ Equity 340,000 310,000
Stockholders’ Equity attributable to Preferred Stock 20,000 20,000
Number of Common Shares Outstanding 10,000 14,000
11. Compute Vollmer’s earnings per share for 2019.
12. Compute Vollmer’s price/earnings ratio for 2019, assuming the market price is $40 per share.
13. Compute Vollmer’s rate of return on common stockholders’ equity for 2019.
Organizing a corporation and issuing stock
Montel and Jeremy are opening a paint store. There are no competing paint stores in the area. They must decide how to organize the business. They anticipate profits of \(350,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
3. If they decide to issue \)5 par common stock and anticipate an initial market price of \(20 per share, how many shares will they need to issue to raise \)2,750,000?
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