P18-6B Assume that you are considering purchasing stock in a company in the pharmaceu- tical industry. You have narrowed the choice to Eckert. Inc., and Biomed. Inc.. and have assembled the following data. Selected income statement data for current year: Eckert, Inc. Biomed, Inc. Net sales tall on credit) $519,000 $603.000 Cost of goods sold. 387,000 454,000 Income from operations. 72,000 93.000 Interest expense.. 8.000 Net income 32,000 56,000 Selected balance sheet and market price data at end of current year: Eckert, Inc. Biomed, Inc. Current assets: Cash Short-term investments. Current receivables, net Inventories... Prepaid expenses. Total current assets $ 39,000 13,000 $ 25.000 6.000 164,000 189.000 183,000 211,000 15,000 19,000 414.000 450,000 Total assets.... 938,000 974,000 Total current liabilities. 338.000 366,000 Total liabilities 691,000* 667,000* Preferred stock, 4%. $100 par. 25.000 Common stock, $1 par (150,000 shares) 150.000 $5 par (20,000 shares) 100,000 Total stockholders' equity. 247,000 307,000 Market price per share of common stock. $55.50 $9.75 *Notes and bonds payable: Eckert, Inc. $303.000 Biomed. Inc.. $4,000 Selected balance sheet data at beginning of current year: Eckert, Inc. Biomed, Inc. Current receivables, net. $193,000 $142.000 Inventories 197.000 209,000 Total assets. 909,000 842,000 Preferred stock, 4%. $100 par. 25,000 Common stock, $1 par (150,000 shares) $5 par (20,000 shares) 150,000 100,000 Total stockholders' equity............ 215.000 263.000 Your investment strategy is to purchase the stocks of companies that have low price/earnings ratios but appear to be in good shape financially. Assume that you have analyzed all other factors, and your decision depends on the results of the ratio analysis to be performed. Required 1. Compute the following ratios for both companies for the current year and decide which company's stock better fits your investment strategy

a. Current ratio

b. Acid-test ratio

c. Inventory turnover

d. Times-interest-earned ratio

e. Return on common stockholders' equity

f. Earnings per share of common stock g. Book value per share of common stock h. Price/earnings ratio 2. Compute each company's economic-value-added (EVA) measure, and determine whether their EVAs confirm or alter your investment decision. Each company's cost of capital is 12%. Round all amounts to the nearest $1.000.