Phelps, Inc. had assets of $71,028, liabilities of $16,084, and 11,130 shares of outstanding common stock at December 31, 2017. Net income for 2017 was $8,236. The company had assets of $83,529, liabilities of $19,293, 10,897 shares of outstanding common stock, and its stock was trading at a price of $10 per share at December 31, 2018. Net income for 2018 was $10,114.

Required:
a. Calculate EPS for 2018.
b. Calculate ROE for 2018.
c. Calculate the Price/Earnings Ratio for 2018.

Question

contestada

Respuesta :

Tundexi Tundexi · Answer 1 · 2021-04-26T03:19:47+02:00

Answer:

a. Earning per share = Net income / Average no of shares outstanding

Average no of shares outstanding = (Beginning shares + Ending share)/2 = (11,130 + 10,897) / 2 = 11,013.5.

Earning per share = $10,114/11,013.5 shares = $0.9183

b. Return on equity = Net income / Average stockholders equity

Stockholders equity 2017 = $71,028-$16,084 = $54,944

Stockholders equity 2018 = $83,529-$19,293 = $64,236

Average Stockholders equity = ($54,944+$64,236)/2 = $59,590

Return on equity = $10,114/$59,590

Return on equity = 0.1697265

Return on equity = 16.97%

c. Price earnings ratio = Market price per share / Earnings per share

Price earnings ratio = $10/$0.9183

Price earnings ratio = 10.88968746596973

Price earnings ratio = 10.89