Phelps, Inc. had assets of $131,904, labilities of $27 208, and 18,546 shares of
ID: 2518989 • Letter: P
Question
Phelps, Inc. had assets of $131,904, labilities of $27 208, and 18,546 shares of outstanding common s at December 31, 2015. Net income for 2015 was $13,724. The company had assets of $154,773, liabilities of s32 649 13,165 shares of outstandng and its stock was trading at a price of $10 per share at December 31, 2016. Net income for 2016 was $12,292. Required: a. Calculate EPS for 2016.(Do not round intermediate calculations. Round your final answer to 2 decimal places.) b. Calculate ROE for 2016. (Round your answer to 1 decimal place.) c. Calculate the Price/Earnings Ratio for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) earchExplanation / Answer
Answer to Part a.
Earning per Share (EPS) = Net Income / Share Outstanding
Earning per Share (EPS) for 2016 = 12,292 / 13,165
Earning per Share (EPS) for 2016 = $0.93
Answer to Part b.
Return on Equity (ROE) = Net Income / Average Stockholders’ Equity
Year ending December 31, 2015:
Total Assets = Total Liabilities + Total Stockholders’ Equity
$131,904 = $27,208 + Total Stockholders’ Equity
Total Stockholders’ Equity = $104,696
Year ending December 31, 2016:
Total Assets = Total Liabilities + Total Stockholders’ Equity
$154,773 = $32,649 + Total Stockholders’ Equity
Total Stockholders’ Equity = $122,124
Average Stockholders’ Equity = (104,696 + 122,124) / 2
Average Stockholders’ Equity = $113,410
Return on Equity (ROE) for 2016 = 12,292 / 113,410 * 100
Return on Equity (ROE) for = 10.8%
Answer to Part c.
Price Earning Ratio = Price per Share / Earning per Share
Price Earning Ratio for 2016 = 10 / 0.93
Price Earning Ratio for 2016 = 10.75
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