Phelps, Inc. had assets of $108,230, liabilities of $22,882, and 15,662 shares o
ID: 2462863 • Letter: P
Question
Phelps, Inc. had assets of $108,230, liabilities of $22,882, and 15,662 shares of outstanding common stock at December 31, 2015. Net income for 2015 was $11,590. The company had assets of $127,067, liabilities of $27,455, 12,283 shares of outstanding, and its stock was trading at a price of $10 per share at December 31, 2016. Net income for 2016 was $11,445.
a.
Calculate EPS for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
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 2 decimal places.)
.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 2 decimal places.)
Explanation / Answer
a. Earnings per share = Net income / weighted average shares outstanding
= 11445 / 12283 = 0.93
b. ROE = net income / share holders equity
= 11445 / 12283 * 10
= 11445 / 122830 = 0.093
c. Price earnings ratio = Market per share / Earnings per share
= 10 / 0.93 = 10.75.
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