Question

Current 1 Yr Ago 2 Yrs Ago At December 31 Yr Assets Cash 31,600 34,500 37,800 62,600 82,400 10,393 300,107 $525,000 $490 ,000 $330,000 Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net 51,400 51,400 3,666 185,734 88,900 79,691 9,875 314,934 Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings $126,803 $ 80,326 42,689 109,319 162,500 136,010 137,855 73,659 162,500 51,152 $525,000 $490 ,000 $330,000 99,687 162,500 Total liabilities and equity The company's income statements for the Current Year and 1 Year Ago, follow. For Year Ended December 31 Current Yr $682,500 1 Yr Ago Sales $583,100 Cost of goods sold other operating expenses Interest expense $416,325 211,575 11,603 8,873 $379,015 147,524 13,411 8,747 Income tax expense Total costs and expenses 648,376 548,697 $ 34,403 34,124 Net income 2.10 2.12 Earnings per share Additional information about the company follows. Common stock market price, December 31, Current $34.00 Year Common stock market price, December 31, 1 Year Ago Annual cash dividends per share in Current Year Annual cash dividends per share 1 Year Ago 32.00 0.34 0.17 For both the Current Year and 1 Year Ago, compute the following ratios 1. Return on common stockholders' equity 2. Price-earnings ratio on December 31 2a. Assuming Simon's competitor has a price-earnings ratio of 7, which company has higher market expectations for future growth? 3. Dividend yield. Compute the return on common stockholders' equity for each year Return On Common Stockholders' Equity /Choose Denominator: Return On Common Stockholders' Choose Numerator: Equity Return on common stockholders equity 0 % Current Year: 1 Year Ago: 0 % Compute the dividend yield for each year. (Round your answers to 2 decimal places.) Dividend Yield Choose Denominator: Dividend Yield Choose Numerator: Accounts receivable, net Annual cash dividends per share X Dividend yield Current Year 0.34 % 16.2 2.10 $ 2.12( 1 Year Ago $ 8.0 % 0.17

Answer 1

(1) Return on common stockholders' Equity Choose Return on common Choose Numerator: 1 Denominator: = stockholders Equity Met Preferred, Average common Return on common stockholders - stockholders Equity Income I Dividends equity Current Year: $34,124 - 0 / $299,432- 11.4 I year Ago: $34,403 - 0 18 257,004 = 13.4 Calculation: Average common stockholders' equity = (Beginning common stockholders equity & Ending common stockholders equity) : 2 Common Stockholders' eq mon stock & Retained Earrings) Common Stockholders' equity of current year. = $162,500 + $ 136,010 $298, 510 common stockholders' equity of 1 year ago = $162,500 + $137,85S = $300,355 Average common stockholders' equity (current year) = ($300,355 + $298,510) = 2 = $598,865 = 2 = $299,432.5 or $299432

Average common stockholders' equity of 1 year ago = ($162,500 + $51,152 + $ 162,500 + $ 137,855) = 2 e $514,007 - 2 - $257,004 Price Earnings Ratio Choose Nurterator / Choose I Denominator Market Price per Earn Common Share Share Current year. $34.00 / $2.10 1 year Ago: $32.00 / $2.12 Price-Earnings Ratio Price - Earnings Ratio 16.2 15.1 = (26) Simon company has higher expectations for future growth Dividend - Yield Dividend Dividend Yield Choose Numerator / Choose Denominator = Annual cash dividend Market Price per share Per share $ 0.34 $34.00 $0.17 2 $ 32.00 Yield Current year: % 1.00 0.53 1 Year Ago: