Current assets $745,000 $820,000 Property, plant, and equipment 1,510,000 1,400,
ID: 2340483 • Letter: C
Question
Current assets $745,000 $820,000
Property, plant, and equipment 1,510,000 1,400,000
Current liabilities (non-interest-bearing) 160,000 140,000
Long-term liabilities, 12% 400,000 400,000
Preferred 10% stock 250,000 250,000
Common stock, $25 par 1,200,000 1,200,000
Retained earnings, beginning of year 230,000 160,000
Net income for year 110,000 155,000
Preferred dividends declared (25,000) (25,000)
Common dividends declared (70,000) (60,000)
Round dollar values to two decimal places and other final answers to one decimal place.
a. Return on total assets %
b. Return on stockholders' equity %
c. Return on common stockholders' equity %
d. Earnings per share on common stock $
e. Price-earnings ratio on common stock
f. Dividend yield %
Explanation / Answer
a Return on asset =Net Income/Average Total asset% =110000/2237500% 4.916201 Average total asset Current asset 745000 820000 Property, plant and equipment 1510000 1400000 2255000 2220000 Average Total asset = (2255000+2220000)/2 = 2237500 b Return on stockholder's equity = Net Income/Average stockholder's equity% = =110000/1638000% = 6.715507 Average stockholder's equity Retained earning Beginning 230000 160000 Add: net Income 11000 155000 Less : Dividends 95000 85000 Retained earning Ending 146000 230000 Common stock 1200000 1200000 Preferred stock 250000 250000 Total stockholder's equity 1596000 1680000 Average stockholder's equity = = (1596000+1680000)/2 = 1638000 c Return on common stockholder's equity = Net Income/Average common stockholder's equity% = =(110000-25000)/1388000% = 6.123919 Note : here net Income means net income after paying preferred dividends Average stockholder's equity Retained earning Beginning 230000 160000 Add: net Income 11000 155000 Less : Dividends 95000 85000 Retained earning Ending 146000 230000 Common stock 1200000 1200000 Total stockholder's equity 1346000 1430000 Average stockholder's equity = = (1346000+1430000)/2 = 1388000 d Earning per share on common stock = Net Income after preferred dividends/No. of common stock outstanding = =(110000-25000)/(1200000/25) = 1.770833 e Price-Earnings ratio on common stock = Since the Market price per share is required and is not given in the question, hence It is not calculated f Dividend Yeilds = Since the Market price per share is required and is not given in the question, hence It is not calculated
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