Need help: 1. Total common equity at the end of last year was$300,000 and its ne
ID: 2770550 • Letter: N
Question
Need help: 1. Total common equity at the end of last year was$300,000 and its net income after taxes was $55,000. What isits ROE? 18.33%.........18.67%..........19.00%.......19.33%...........19.67%2. Stock price at the endd of the last year was $30.25and its earnings per share for the year were $2.45. What wasits P/E ratio? 11.65.........12.00.......12.35......12.70
3. Paid out $26,000 common dividends during 2005, and itended the year with $150,000 of retained earnings. The prioryear's retained earnings were $145,000. What was the firms'2005 net income? $30,000.......$31,000.....$32,000.....$33,000....$34,000 1. Total common equity at the end of last year was$300,000 and its net income after taxes was $55,000. What isits ROE? 18.33%.........18.67%..........19.00%.......19.33%...........19.67%
2. Stock price at the endd of the last year was $30.25and its earnings per share for the year were $2.45. What wasits P/E ratio? 11.65.........12.00.......12.35......12.70
3. Paid out $26,000 common dividends during 2005, and itended the year with $150,000 of retained earnings. The prioryear's retained earnings were $145,000. What was the firms'2005 net income? $30,000.......$31,000.....$32,000.....$33,000....$34,000
Explanation / Answer
(1) Return on Equity (ROE) = Net Income / Total Equity
ROE = $55,000 / $300,000
(2) Price Earning Ratio (P/E) = Price per share / annual Earning Per share (EPS)
P/E = $30.25 /$2.45
(3) Common dividends paidduring 2005 = $26,000
Retainedearnings in the year 2005 = $150,000
The prioryear’s retained earnings = $145,000
NetIncome = ?
Net Income = $31,000
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