Selected financial data for Irvington Company appear below: Account Balances Beg
ID: 2443960 • Letter: S
Question
Selected financial data for Irvington Company appear below:
Account Balances
Beginning
of year End of
year
Preferred stock $125,000 $125,000
Common stock 300,000 400,000
Retained earnings 75,000 185,000
During the year, the company paid dividends of $10,000 on its preferred stock. The company's net income for the year was $120,000. The company's return on common stockholders' equity for the year is closest to:
a. 17%.
b. 19%.
c. 23%.
d. 25%.
Selected financial data for Barnstable Company appear below:
19x9 19x8
(in thousands)
Sales $1,500 $1,200
Operating Expenses 450 400
Interest Expense 75 30
Cost of Goods Sold 900 720
Dividends Declared and Paid 30 0
For 19x9, the gross margin as a percentage of sales was:
a. 5%.
b. 60%.
c. 10%.
d. 40%.
For 19x9, the net income before taxes as a percentage of sales was:
a. 10%.
b. 3%.
c. 8%.
d. 5%.
For 19x9, the net operating income as a percentage of sales was:
a. 70%.
b. 8%.
c. 10%.
d. 40%.
Boston Company is contemplating the purchase of a new machine on which the following information has been gathered:
Cost of the machine $38,900
Annual cash inflows expected $10,000
Salvage value $ 5,000
Life of the machine 6 years
The company's discount rate is 16%, and the machine will be depreciated using the straight-line method. Given these data, the machine has a net present value of:
a. -$26,100.
b. -$23,900.
c. $0.
d. +$26,100.
Information concerning the common stock of Morris Company as of the end of the company's fiscal year is presented below.
Number of shares outstanding 460,000
Par value per share $ 5.00
Dividends paid per share $ 6.00
Market price per share $ 54.00
Earnings per share $ 18.00
The dividend yield ratio is closest to:
a. 50.0%.
b. 33.3%.
c. 120.0%.
d. 11.1%.
Explanation / Answer
1.Option d.25% is the correct answer. 1.Return on common stockholders equity = Net Income/Average Common Stockholders' Equity =$120,000/($375,000+585,000/2) =$120,000/480,000 =0.25 =25% 2.Option d.40% is the correct answer. For 19x9 Sales $1,500 Less: Cost of goods sold 900 _______ Gross Profit 600 ________ Gross Profit margin = Gross Profit/Net Sales = $600/$1,500 = 0.4 = 40% 3.Option a. 10% is the correct answer. Sales $1,500 Less: Cost of goods sold 900 _________ Gross Profit 600 Less:Operating expense 450 __________ Income before tax and interest 150 Net income before taxes as a percentage of sales was = 150/1,500 *100 =10% 4.Net operating income as a percentage of sales Option c . 10% is the correct answer. 150/1,500 * 100 = 10% 5.Option c $0 is the correct answer. Year Cash flows PV Factor at 16% NPV 0 ($38,900) 1 ($38,900) 1 $10,000 0.8621 8,621 2 $10,000 0.7432 7,432 3 $10,000 0.6407 6,407 4 $10,000 0.5523 5.523 5 $10,000 0.4761 4,761 6 $10,000 +5,000 0.4104 6,156 _________ Net Present Value $ 0 __________ 6.Option b . 33.3% is the correct answer. Dividend Yield Ratio = Annual Dividend/Current Stock Price Dividends expressed as a rate of return on the market price of the stock. Dividend Yield Ratio = $18/$54 =1/3 =33.3%Related Questions
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