Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Sales for J. P. Hulett Inc. during the past year amounted to
$4.3
million. Gross profits totaled
$1.06
million, and operating and depreciation expenses were
$493,000
and
$357,000,
respectively. Dividend income for the year was
$11,000,
which was paid by a firm in which Hulett owns
85
percent of the shares. Use the corporate tax rates shown in the popup window,
Taxable Income
Marginal Tax Rate
$0−$50,000
15%
$50,001−$75,000
25%
$75,001−$100,000
34%
$100,001−$335,000
39%
$335,001−$10,000,000
34%
$10,000,001−$15,000,000
35%
$15,000,001−$18,333,333
38%
Over $18,333,333
35%
to Comcute the corporation's tax liability. What are thefirm's average and marginal tax rates?
Lake Incorporated and River Incorporated reported net incomes of $275,000 and $231,000, respectively, for the most recent fiscal
year. Both companies had 55,000 shares of common stock issued and outstanding. The market price per share of Lake's stock was
$58, while River's sold for $62 per share.
Required
a. Determine the P/E ratio for each company.
b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in
income?
Complete this question by entering your answers in the tabs below.
Required A Required B
Determine the P/E ratio for each company.
Note: Do not round intermediate calculations. Round your answers to the nearest whole number.
Company
Lake, Incorporated
River, Incorporated
P/E Ratio
Cecilia Company reported net income of $1,250,000. The average total liabilities
were $4,302,500 and average total stockholders' equity was $5,205,000. Interest
expense was $100,500 and the tax rate was 40%. Cecilia's return on assets ratio is
closest to:
13.8%
13.1%
12.1%
14.2%
Chapter 4 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 4 - Common-Size Analysis. Common-size analysis is a...Ch. 4 - Earnings per Share. Firm A reports an increase in...Ch. 4 - Prob. 3QECh. 4 - Profit Margin for ROA versus ROCE. Describe the...Ch. 4 - Concept and Measurement of Financial Leverage....Ch. 4 - Advantages of Financial Leverage. A company...Ch. 4 - Prob. 7QECh. 4 - Nucor, a steel manufacturer, reported net income...Ch. 4 - Phillips-Van Heusen, an apparel manufacturer,...Ch. 4 - TJX, Inc., an apparel retailer, reported net...
Ch. 4 - Boston Scientific, a medical device manufacturer,...Ch. 4 - Valero Energy, a petroleum company, reported net...Ch. 4 - Exhibit 4.22 presents selected operating data for...Ch. 4 - Microsoft Corporation (Microsoft) and Oracle...Ch. 4 - Prob. 17PCCh. 4 - Prob. 18PCCh. 4 - Texas Instruments (TI) designs and manufactures...Ch. 4 - JCPenney operates a chain of retail department...Ch. 4 - Prob. 21PCCh. 4 - Selected data for General Mills for 2007, 2008,...Ch. 4 - Prob. 23PCCh. 4 - Hasbro is a leading firm in the toy, game, and...Ch. 4 - Fitch sells casual apparel and personal care...Ch. 4 - Prob. 26PCCh. 4 - Starwood Hotels (Starwood) owns and operates many...Ch. 4 - Select data for Avis and Hertz for 2012 follow....Ch. 4 - Integrative Case 1.1 introduced the industry...Ch. 4 - Prob. 1ABICCh. 4 - Prob. 1ACICCh. 4 - Prob. 1BAICCh. 4 - Prob. 1BBICCh. 4 - Walmart and Carrefour follow similar strategies....Ch. 4 - Walmart and Carrefour follow similar strategies....
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- Please consider the following financial numbers for Carridine Company and then prepare answers to the required questions. Carridine Company reported a net income of $1.903 million on revenues of $55.618 million for the year 2019. Interest expense totaled $0.459 million and preferred dividends totaled $13.5 million. The average total assets for the year were $17,5 million. The income tax rate is 21%. Average preferred shareholders’ equity totaled $250 million, and average common shareholders’ equity totaled $7.5 million. Compute the rate of return on assets (ROA) and disaggregate ROA into profit margin and assets turnover components. Compute the rate of return on common stock equity (ROCE) and disaggregate ROCE into profit margin, assets turnover, and capital leverage ratio components. Calculate the amount of net income to common shareholders.arrow_forwardThe following information relates to the operations of Branded Ltd. The net profit after tax was $1,000,000. The company distributed ordinary dividends of $600,000 to its shareholders. Over the year, weighted average number of ordinary shares were 2,000,000. Ordinary shares are currently selling for $8.00 per share. What is the earning per share for the company? 0.20. 0.33. 0.40. 0.50.arrow_forwardBoston Scientific, a medical device manufacturer, reported net income (amounts in millions) of $5,062 on sales of $9,624 during Year4. Interest expense totaled $164. The income tax rate was 35 percent. Average total assets were $66,934.5, and average common shareholders’ equity was $3,443.5. The firm did not have preferred stock outstanding or minority interest in its equity.a. Compute the rate of ROA. Disaggregate ROA into profit margin for ROA and assets turnover components.b. Compute the rate of ROCE. Disaggregate ROCE into profit margin for ROCE, assets turnover, and capital structure leverage ratio components.c. Calculate the amount of net income to common shareholders derived from the excess return on creditors’ capital and the amount from the return on common shareholders’ capitaarrow_forward
- anapparel manufacturer, reported net income (amounts in thousands) for Year 4 of $58,615 onsales of $1,460,235. It declared preferred dividends of $21,122. Preferred shareholders’ equitytotaled $264,746 at both the beginning and end of Year 4. Common shareholders’ equitytotaled $296,157 at the beginning of Year 4 and $364,026 at the end of Year 4. Phillips-VanHeusen had no noncontrolling interest in its equity. Total assets were $1,439,283 at the beginningof Year 4 and $1,549,582 at the end of Year 4. Compute the rate of ROCE for Year 4 anddisaggregate it into profit margin for ROCE, assets turnover, and capital structure leverage ratiocomponents.arrow_forwardFor the most recent year, Wilson Enterprises had sales of $689,000, cost of goods sold of $492,300, depreciation expense of $61,200, additions to retained earnings of $48,560, and dividends per share of $2.18. There are 12,000 shares of common stock outstanding and the tax rate is 35 percent. What is the times interest earned ratio? a. 7.15 b. 6.59 C. 5.09 d. 5.47arrow_forwardWhipporwill, Incorporated’s, net income for the most recent year was $24,020. The tax rate was 24 percent. The firm paid $4,156 in total interest expense and deducted $6,291 in depreciation expense. What was the cash coverage ratio for the yeararrow_forward
- A & E Holdings' profit and loss statement showed a net income of 934% of revenue or $29,250. Twenty percent of net income was paid in corporation tax and 75% of the net income after-tax was paid out as dividends to Alice and Emile, who share in the ratio 5 to 3. (a) What was the revenue of A & E Holdings? (b) How much was the after-tax income? (c) How much was paid out in dividends? (d) What percent of net income did Alice receive as a dividend?arrow_forward(Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.3 million. Gross profits totaled $1.07 million, and operating and depreciation expenses were $497,000 and $349,000, respectively. Dividend income for the year was $13,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, to Comcute the corporation's tax liability. What are the firm's average and marginal tax rates? The firm's tax liability for the year is $ (Round to the nearest dollar.)arrow_forwardSanta, Inc. recently reported that its earnings per share were $3.00. The company has 200,000 shares of stock outstanding. Interest expense was $550,000. The corporate tax rate is 50%. What is the company’s operating income (EBIT)?arrow_forward
- (Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.4 million. Gross profits totaled $1.01 million, and operating and depreciation expenses were $502,000 and $345,000, respectively. Dividend income for the year was $11,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, E, to Comcute the corporation's tax liability. What are the firm's average and marginal tax rates? The firm's tax liability for the year is $. (Round to the nearest dollar.) Data table Taxable Income $0-$50,000 $50,001 - $75,000 $75,001 - $100,000 $100,001 - $335,000 $335,001 - $10,000,000 Marginal Tax Rate 15% 25% 34% 39% 34% 35% 38% $10,000,001 - $15,000,000 $15,000,001 - $18,333,333 Over $18,333,333 35% (Click on the icon in order to copy its contents into a spreadsheet.) Xarrow_forwardFor the most recent year, Camargo, Incorporated, had sales of $566,000, cost of goods sold of $248,960, depreciation expense of $64,400, and additions to retained earnings of $76,800. The firm currently has 24,000 shares of common stock outstanding and the previous year's dividends per share were $1.50. Assuming a 23 percent income tax rate, what was the times interest earned ratio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Times interest earned timesarrow_forwardMoore Corporation has earned $205,500 after tax. The return on equity for Moore Corporation is 18%. What is Moore's stockholders' equity? (format as $1,234.56)arrow_forward
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