value: 5.00 points Phelps, Inc. had assets of $98,084, liabilities of $21,028, a
ID: 2589295 • Letter: V
Question
value: 5.00 points Phelps, Inc. had assets of $98,084, liabilities of $21,028, and 14,426 shares of outstanding common stock at December 31, 2015. Net income for 2015 was $10,675. The company had assets of $115,193, liabilities of $25,229, 11,905 shares of outstanding, and its stock was trading at a price of $10 per share at December 31, 2016. Net income for 2016 was $11,082 Required a. Calculate EPS for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) EPS 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.) Price/Earnings RatioExplanation / Answer
1) EPS for year 2016 = $0.84 per share
2) ROE for year 2016 = 13.27%
3) Price/Earnings Ratio for year 2016 =11.90 times
Working:
1) EPS for year 2016 = Net Income of 2016/Average outstanding common shares = 11,082 / ((14,426 + 11,905))/2) = $0.84 per share
2) ROE for year 2016 = Net Income of 2016/Average Shareholder’s Equity = 11,082 ((98,084 - 21,028+ 115193 -25,229) /2) = 13.27%
3) Price/Earnings Ratio for year 2016 = Market per share/Earning per share = $10 / $0.84 = 11.90 times
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