Middletown Corporation Issued 3,000,000 Shares of $1 Par Value Common

question 100

Essay

Middletown Corporation issued 3,000,000 shares of $1 par value common stock. In the current year, Middletown reported sales of $33.2 million, an operating profit of $5.4 million, and net income of $4.2 million. During the year, Middletown sold a business segment at a loss.
Required:
A) Show earnings per share as it would appear on the income statement.
B) Assume an investment capitalization rate of 6%. What price should an investor be willing to pay for a share of stock?

• A) Show earnings per share as it would appear on the income statement.
• B) Assume an investment capitalization rate of 6%. What price should an investor be willing to pay for a share of stock?

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Definitions:

Education

The process of receiving or giving systematic instruction, especially at a school or university, or the knowledge and skills acquired through this process.

Deviant Behavior

Behavior that violates the norms that apply in a given situation.

Secondary Deviance

Deviant behavior employed by a person as a means of defense or adjustment to the problems created by others’ reactions to rule breaking by him or her.

Temper Tantrums

Emotional outbursts, usually seen in children, characterized by yelling, crying, or striking out, due to frustration or inability to express needs.