Answer:
Wiper, Inc.
a. Return on investment, based on net income and average total assets, for 2017 and 2016.
2017 2016
Return on investment 7% 8%
b. Return on equity for 2017 and 2016.
2017 2016
Return on equity 22% 21%
c. Working capital and the current ratio for each of the past three years.
2017 2016 2015
Working capital $176 $140 $109
Current ratio 1.3 1.2 1.1
d. Earnings per share for 2017 and 2016:
2017 2016
EPS = $5.28 $4.58
e. If Wiper's stock had a price/earnings ratio of 12 at the end of 2017, the market price of the stock is:
= $63.36
Explanation:
a) Data and Calculations:
WIPER, INC.
Condensed Balance Sheets
December 31, 2017, 2016, 2015
(in millions)
2017 2016 2015 Average 2017 2016
Current assets $764 $981 $843 $872.5 $912
Other assets 2,424 1,931 1,730 $2,177.5 $1,830.5
Total assets $3,188 $2,912 $2,573 $3,050 $2,742.5
Current liabilities $588 $841 $ 734 $714.5 $787.5
Long-term liabilities 1,582 1,034 910 $1,308 $972
Stockholders’ equity 1,018 1,037 929 $1,027.5 $983
Total liabilities and
stockholders' equity $ 3,188 $ 2,912 $ 2,573 $3,050 $2,742.5
WIPER, INC
Selected Income Statement and Other Data
For the year Ended December 31, 2017 and 2016
(in millions)
2017 2016
Income statement data:
Sales $3,061 $2,924
Operating income 307 321
Interest expense 95 76
Net income 224 219
Other data:
Average number of common shares outstanding 42.4 47.8
Total dividends paid $61.0 $53.4
a. Return on investment:
2017 = 7% ($224/$3,050 * 100)
2016 = 8% ($219/$2,742.5 * 100)
b. Return on equity:
2017 = 22% ($224/$1,018 * 100)
2016 = 21% ($219/1,037 * 100)
c. Working capital = Current assets Minus Current liabilities
Current Ratio = Current assets/Current liabilities
2017 2016 2015
Current assets $764 $981 $843
Current liabilities $588 $841 $734
Working capital $176 $140 $109
Current ratio 1.3 1.2 1.1
d. Earnings per share = Net income/Outstanding shares
2017 2016
Net income 224 219
Outstanding shares 42.4 47.8
EPS = $5.28 $4.58
e. Price/Earnings ratio = 12 for 2017
Market price = $63.36 ($5.28 * 12)
