Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)
Assets

2016

Cash and securities

$3,000

Accounts receivable

15,000

Inventories

18,000

Total current assets

$36,000

Net plant and equipment

$24,000

Total assets

$60,000

Liabilities and Equity
Accounts payable

$18,630

Accruals

8,370

Notes payable

6,000

Total current liabilities

$33,000

Long-term bonds

$9,000

Total liabilities

$42,000

Common stock

$5,040

Retained earnings

12,960

Total common equity

$18,000

Total liabilities and equity

$60,000

Income Statement (Millions of $) 2016
Net sales

$84,000

Operating costs except depreciation

78,120

Depreciation

1,680

Earnings before interest and taxes (EBIT)

$4,200

Less interest

900

Earnings before taxes (EBT)

$3,300

Taxes

1,320

Net income

$1,980

Other data:
Shares outstanding (millions)

500.00

Common dividends (millions of $)

$693.00

Int rate on notes payable & L-T bonds

6%

Federal plus state income tax rate

40%

Year-end stock price

$47.52

Refer to Exhibit 4.1. What is the firm's ROE? Do not round your intermediate calculations.

Question 20 options:

11.77%

11.00%

11.55%

10.89%

10.01%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Concepts and Applications

Authors: Stephen Foerster

1st edition

013293664X, 978-0132936644

More Books

Students also viewed these Finance questions