The King Mattress Company Had the Following Operating Results for 2018-2019

question 8

Multiple Choice

The King Mattress Company had the following operating results for 2018-2019. In addition, the company paid dividends in both 2018 and 2019 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2018 was $8 and $7 in 2019. The industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2019.
$\text { Balance Sheet, Dec 31, }$
$\begin{array}{lllll} & 2019 & 2018 \\\text { Cash } & \$ 340,000 & \$ 100,000 \\\text { Accounts Receivable } & \$ 350,000 & \$ 400,000 \\\text { Inventory } & \$ 250,000 & \$ 300,000 \\\hline\text { Total Current Assets }&\$940,000&\$800,000\\\text { Long-lived Assets }&1,080,000&1,100,000\\\hline\text { Total Assets }&\$2,020,000&\$1,900,000\\\hline \text { Current Liabilities }&\$200,000&\$300,000\\\text { Long-term Debt } & 600,000 & 500,000 \\\text { Shareholder Equity } & 1,220,000 & 1,100,000\\\hline\text { Total Debt and Equity }&\$2,020,000&\$1,900,000\end{array}$

$\text { Income Statement, for year ended Dec } 31 \text {, }$
$\begin{array}{lcc} & 2019 & 2018 \\\text { Sales } & \$ 4,750,000 & \$ 4,500,000 \\\text { Cost of Sales } & 4,100,000 & 4,000,000\\\hline\text { Gross Margin } & 650,000 & 500,000 \\\text { Operating Expenses } & 350,000 & 400,000 \\\hline\text { Operating Income } & 300,000 & 100,000 \\\text { Taxes } & 120,000 & 40,000\\\hline\text { Net Income }&\$180,000&\$60,000\\\\\text { Cash Flow from Operations } & 2019 & 2018 \\\text { Net Income } & \$ 180,000 & \$ 60.000\\\text { Plus Depreciation Expense } & 50,000 & 50,000 \\\text { + Decrease (-inc) in AccRec. and Inv. } & 100,000&-\\\text { + Increase (-dec) in Cur. Liabl. }&(100,000) &-\\\text { Cash Flow from Operations }&\$230,000&\$110,000\end{array}$
The value of the company, calculated using the sales multiple for 2019 is:

• A)$1,220,000
• B)$1,620,000
• C)$2,520,000
• D)$8,400,000
• E)$7,125,000

Identify the processes of internal and external adaptation within organizations.

Recognize the role of symbols, rituals, and rites in shaping organizational culture.

Distinguish between observable culture, shared values, and common assumptions in organizational settings.

Comprehend the significance of subcultures and countercultures within the organizational context.

---

Definitions:

Exercise Price

The exercise price is the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, representing the average difference from the mean; widely used in finance as a measure of investment risk.

Arbitrage Opportunity

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another, securing a risk-free profit.

Long-short Equity Fund

A type of investment fund that takes both long and short positions in stocks, aiming to profit from increases in the prices of some stocks and decreases in the prices of others.