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taurus [48]
3 years ago
9

Phelps, Inc. had assets of $87,938, liabilities of $19,174, and 13,190 shares of outstanding common stock at December 31, 2017.

Net income for 2017 was $9,761. The company had assets of $103,319, liabilities of $23,003, 11,527 shares of outstanding common stock, and its stock was trading at a price of $10 per share at December 31, 2018. Net income for 2018 was $10,719. Required: Calculate EPS for 2018. Calculate ROE for 2018. Calculate the Price/Earnings Ratio for 2018.
Business
1 answer:
DochEvi [55]3 years ago
8 0

Answer:

Phelps, Inc.

EPS for 2018                                 $0.93

ROE for 2018                                 13.3%

Price/Earnings Ratio for 2018       10.75

Explanation:

a) Data and Calculations:

                             December 31, 2017     December 31, 2018

Assets                             $87,938                      $103,319

Liabilities                            19,174                         23,003

Equity                             $68,764                       $80,316

Outstanding common

 stock                                13,190                         11,527

Stock price per share                                            $10

Net income                      $9,761                       $10,719

EPS for 2018                                                       $0.93 ($10,719/11,527)

ROE for 2018                                                      13.3% ($10,719/$80,316*100)

Price/Earnings Ratio for 2018                            10.75 ($10/$0.93)

EPS (Earnings Per Share) = Net income/Number of outstanding shares

ROE (Return on Equity) = Net income/Equity * 100

Price/Earnings Ratio = Stock price/EPS

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Answer:

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Explanation:

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1              1.25× 1.15^1× 1.11^(-1) =1.295

2             1.25× 1.15^2× 1.11^(-2)= 1.342

3              1.25× 1.15^3× 1.11^(-3)=  1.390

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This wild determined in two steps as follows:

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<em>PV = A × D× (1+r)/(r-g)</em>

(1.25× 1.15^3× 1.06)/(0.11-0.06)=40.30

<em>Step 2 :Present value in year 0</em>

PV in year 0 = 40.30× 1.11^(-3)= 29.469

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Answer:

Instructions are below.

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