Question
The balance sheet and income statement shown below . Note that the firm has no amortization charges, it does not lease any assets, none of
The balance sheet and income statement shown below . 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 $)
Assets2018
Cash and securities$3,000
Accounts receivable15,000
Inventories18,000
Total current assets$36,000
Net plant and equipment$24,000
Total assets$60,000
Liabilities and Equity
Accounts payable$18,630
Accruals8,370
Notes payable6,000
Total current liabilities$33,000
Long-term bonds$9,000
Total liabilities$42,000
Common stock$5,040
Retained earnings12,960
Total common equity$18,000
Total liabilities and equity$60,000
Income Statement (Millions of $)
2018Net sales$84,000
Operating costs except depreciation78,120
Depreciation1,680
Earnings before interest and taxes (EBIT)$4,200
Less interest900
Earnings before taxes (EBT)$3,300
Taxes1,320
Net income$1,980
Other data:Shares outstanding (millions)500.00
Common dividends (millions of $)$693.00
Int rate on notes payable & L-T bonds6%
Federal plus state income tax rate40%
Year-end stock price$47.52
What is the firm's ROE?Do not round your intermediate calculations.
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Practical Financial Management
Authors: William R. Lasher
7th edition
128560721X, 9781133593669, 1133593682, 9781285607214, 978-1133593683
