Phelps, Inc. had assets of $111,612, liabilities of $23,500, and 16,074 shares o

Question

Phelps, Inc. had assets of $111,612, liabilities of $23,500, and 16,074 shares of outstanding common stock at December 31, 2014. Net income for 2015 was $11,895. The company had assets of $131,025, liabilities of $28,197, 12,409 shares of outstanding, and its stock was trading at a price of $10 per share at December 31, 2016. Net income for 2016 was $11,566.

Required:

A. Calculate EPS for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.

B. calculate ROE for 2016. (Round your answer to 1 decimal place.)

C. Calculate the price/earnings ratio for 2016. (do not round intermediate calculations. round your final answer to two decimal places.)

B. calculate ROE for 2016. (Round your answer to 1 decimal place.)

C. Calculate the price/earnings ratio for 2016. (do not round intermediate calculations. round your final answer to two decimal places.)

Explanation / Answer

Earning per share for 2016 = Net Income for 2016 / Outstanding Equity shares

= 11566/12409 i.e 0.9320 per share

Return on equity = Net Income / Shareholders equity

= 11566/(12409*10) i.e 9.32%

Price earning ratio = Price per share / Earning per share

= 10/0.9320 i.e 10.73

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