Abercrombie, like Deckers Outdoor and Wolverine, operates in the apparel industr

Question

Abercrombie, like Deckers Outdoor and Wolverine, operates in the apparel industry. Selected financial data for Abercrombie is provided as follows:

Required:

Calculate the return on equity for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 1 decimal place.)

Calculate the return on the market value of equity for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 1 decimal place.)

Calculate the price-earnings ratio for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 2 decimal places.)

Abercrombie, like Deckers Outdoor and Wolverine, operates in the apparel industry. Selected financial data for Abercrombie is provided as follows:

Explanation / Answer

1.Calculate the return on equity for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 1 decimal place.)

Return on equity for Abercrombie in 2012 = (Net income -Prefered Stock Dividend)/Average Common Stock Equity

Return on equity for Abercrombie in 2012 = (310-0)/(1680+2321)/2

Return on equity for Abercrombie in 2012 = 3.9%

2.Calculate the return on the market value of equity for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 1 decimal place.)

Return on the market value of equity =  (Net income -Prefered Stock Dividend)/Market value of Equity

Return on the market value of equity = (310-0)/(104*18)

Return on the market value of equity = 16.6%

4.Calculate the price-earnings ratio for Abercrombie in 2012. (Enter your answers in millions, not in dollars. Round your answers to 2 decimal places.)

EPS =  (Net income -Prefered Stock Dividend)/Outstanding Share

EPS = (310-0)/104

EPS = 2.98076

Price-earnings ratio for Abercrombie in 2012 = Stock Market Price/EPS

Price-earnings ratio for Abercrombie in 2012 = 18/2.98076

Price-earnings ratio for Abercrombie in 2012 = 6.04

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