Question

The company currently has 4,211,000 shares of common stock outstanding. The net income for the year...

The company currently has 4,211,000 shares of common stock outstanding. The net income for the year ending October 31, 2018, is $9,500,000. The market price of the share is $8.55. The company used a debt-equity ratio of 0.65 and return on assets for the year 2018 is 7.35%. Based on the given information, what is the earnings per share, price-earnings ratio, and return on equity?

Calculate earnings per share, price-earnings ratio, and return on equity.

EPS=

PER=

ROE=

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Homework Answers

Answer #1

- Net income = $9500,000

Earnings per Share(EPS) = Net income/No of shares of common stock outstanding

EPS = $9500,000/4211,000

EPS = $2.26 per share

- Price-Earnings ratio = Market price per share/Earnings per Share

Price-Earnings ratio = $8.55/$2.26

Price-Earnings ratio = 3.78 times

- Return on Assets(ROA) = Net Income/Total Assets

0.0735 = $9500,000/Total Assets

Total Assets = $129,251,700.68

- Debt-Equity ratio = 0.65

Equity Multiplier = 1+ Debt-Equity ratio

Equity Multiplier = 1+0.65 = 1.65

Equity Multiplier = Total Assets/Total equity

1.65 = $129,251,700.68/Total equity

Total equity = $78,334,364.05

- Return on Equity(ROE) = Net Income/Total Equity

ROE = $9500,000/$78,334,364.05

ROE = 12.13%

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