Question

The Taavon Book Company accounting records include the following for 2014 (in thousands):
Sales revenue................................................................................ 124,000
Total operating expenses.............................................................. 101,600
Other revenues............................................................................. $ 1,700
Income tax expense ...................................................................... 7,040

Requirements
1. Prepare Taavon Book Company’s single-step income statement for the year ended December 31, 2014, including EPS. Taavon had 1 million shares of common stock and no preferred stock outstanding during the year.
2. Assume Taavon Book Company’s income from operations reflects that its core business has been steadily increasing by about 10% per year over the past three years and that none of its operations have been discontinued. What does this say about the quality of its earnings?
3. Assume investors capitalize Taavon Book’s earnings from continuing operations at 9%. Estimate the price of one share of the company’s stock.



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  • CreatedJuly 25, 2014
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