Question
Sheridan Company has $1,200,000 in assets and $1,200,000 in stockholders’ equity, with 42,200 shares outstanding the...
Sheridan Company has $1,200,000 in assets and $1,200,000 in
stockholders’ equity, with 42,200 shares outstanding the entire
year. It has a return on assets of 15%. During 2021, it had net
income of $180,000. On January 1, 2022, it issued $375,000 in debt
at 4% and immediately repurchased 21,100 shares for $375,000.
Management expected that, had it not issued the debt, it would have
had net income of $180,000 in 2022. Assume the company pays
dividends on common stock equal to its net income each year. Also,
assume the accrued interest on the debt was paid at December 31,
2022 and the company has no other debt outstanding at
year-end.
Determine the company’s net income and earnings per share for
2021 and 2022. (Ignore taxes in your computations.) (Round earnings
per share to 2 decimal places, e.g. $2.66.)
2021
2022
Net income
$enter net income in dollars $enter net income in
dollars
Earnings per share
$enter earnings per share in dollars rounded to 2 decimal
places $enter earnings per share in dollars rounded to 2 decimal
places
eTextbook and Media
Compute the company’s return on common stockholders’ equity
for 2021 and 2022. (Round answers to 2 decimal places, e.g.
15.25%)
2021
2022
Return on common stockholders’ equity
enter return on common stockholders’ equity ratio in
percentages rounded to 0 decimal places % enter return on common
stockholders’ equity ratio in percentages rounded to 0 decimal
places %
eTextbook and Media
Compute the company’s debt to assets ratio for 2021 and 2022.
(Round answers to 2 decimal places, e.g. 15.25%)
2021
2022
Debt to assets ratio
enter debt to assets ratio in percentages rounded to 0 decimal
places
%
enter debt to assets ratio in percentages rounded to 0 decimal
places
%
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