Valuation with price/earnings multiples For each of the firms shown in the following table, use the data given to estimate its common stock value…

Valuation with price/earnings multiples For each of the firms shown in the following

table, use the data given to estimate its common stock value employing price/

earnings (P/E) multiples.

Assets Liabilities and stockholders’ equity

Cash $ 40,000 Accounts payable $100,000

Marketable securities 60,000 Notes payable 30,000

Accounts receivable 120,000 Accrued wages 30,000

Inventories 160,000 Total current liabilities $160,000

Total current assets $380,000 Long-term debt $180,000

Land and buildings (net) $150,000 Preferred stock $ 80,000

Machinery and equipment 250,000 Common stock (10,000 shares) 260,000

Total fixed assets (net) $400,000 Retained earnings 100,000

Total assets $780,000 Total liabilities and stockholders’ equity $780,000

Gallinas Industries Balance Sheet December 31

Firm Expected EPS Price/earnings multiple

A $3.00 6.2

B 4.50 10.0

C 1.80 12.6

D 2.40 8.9

E 5.10 15.0