a) Show the balance sheet and sales information using the following financial data:
Total assets turnover: 1.5×
Days sales outstanding: 36.5 days (Calculation is based on a 365-day year)
Inventory turnover ratio: 5×
Fixed assets turnover: 3.0×
Current ratio: 2.0×
Gross profit margin on sales: (Sales − Cost of goods sold)/Sales = 25%
Total assets: $300,000
Long-term debt: $60,000
Retained earnings: $97,500
b) Fontaine Inc. recently reported net income of $2 million. It has 500,000 shares of
common stock, which currently trades at $40 a share. Fontaine continues to expand and
anticipates that 1 year from now, its net income will be $3.25 million. Over the next year,
it also anticipates issuing an additional 150,000 shares of stock so that 1 year from now it
will have 650,000 shares of common stock. Assuming Fontaine’s price/earnings ratio
remains at its current level, what will be its stock price 1 year from now?