11) Use the table for the question below. Consider the following income statemen
ID: 2756760 • Letter: 1
Question
11) Use the table for the question below.
Consider the following income statement and other information:
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)
2009
2008
Total sales
610.1
578.3
Cost of sales
(500.2)
(481.9)
Gross profit
109.9
96.4
Selling, general, and
administrative expenses
(40.5)
(39.0)
Research and development
(24.6)
(22.8)
Depreciation and amortization
(3.6)
(3.3)
Operating income
41.2
31.3
Other income
---
---
Earnings before interest and taxes (EBIT)
41.2
31.3
Interest income (expense)
(25.1)
(15.8)
Pre-tax income
16.1
15.5
Taxes
(5.5)
(5.3)
Net income
10.6
10.2
Price per share
$16
$15
Shares outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders' Equity
126.6
63.6
Total Liabilities and Stockholders' Equity
533.1
386.7
Calculate Luther's return of equity (ROE), return of assets (ROA), and price-to-earnings ratio (P/E) for the year ending December 31, 2008. Show all work.
Luther Corporation
Consolidated Income Statement
Year ended December 31 (in $ millions)
2009
2008
Total sales
610.1
578.3
Cost of sales
(500.2)
(481.9)
Gross profit
109.9
96.4
Selling, general, and
administrative expenses
(40.5)
(39.0)
Research and development
(24.6)
(22.8)
Depreciation and amortization
(3.6)
(3.3)
Operating income
41.2
31.3
Other income
---
---
Earnings before interest and taxes (EBIT)
41.2
31.3
Interest income (expense)
(25.1)
(15.8)
Pre-tax income
16.1
15.5
Taxes
(5.5)
(5.3)
Net income
10.6
10.2
Price per share
$16
$15
Shares outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders' Equity
126.6
63.6
Total Liabilities and Stockholders' Equity
533.1
386.7
Explanation / Answer
Solution.
Calculatiion of Luther's return of equity (ROE)
ROE = Net income / Shareholder Equity
10.2 / 63.6 = 16.03%
Calculatiion of Luther's return of assets (ROA)
Net income / Average total asset
10.2 / 193.35 = 5.27
Calculatiion of Luther's price-to-earnings ratio (P/E)
Market value per share / Earning per share
$15 / 1.27 (10.2 / 8) = 11.81
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.