Question

Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.:

WIPER, INC.
Condensed Balance Sheets
December 31, 2017, 2016, 2015
(in millions)
	2017			2016			2015
Current assets	$	829		$	1,071		$	933
Other assets		2,433			1,940			1,739
Total assets	$	3,262		$	3,011		$	2,672
Current liabilities	$	597		$	850		$	752
Long-term liabilities		1,638			1,115			982
Stockholders’ equity		1,027			1,046			938
Total liabilities and stockholders' equity	$	3,262		$	3,011		$	2,672

WIPER, INC
Selected Income Statement and Other Data
For the year Ended December 31, 2017 and 2016
(in millions)
	2017			2016
Income statement data:
Sales	$	3,070		$	2,933
Operating income		316			330
Interest expense		104			85
Net income		251			246
Other data:
Average number of common shares outstanding		43.3			48.7
Total dividends paid	$	70.0		$	54.3

Required:

a. Calculate return on investment, based on net income and average total assets, for 2017 and 2016. (Do not round intermediate calculations. Round your answers to 1 decimal place.)

b. Calculate return on equity for 2017 and 2016. (Round your answers to 1 decimal place.)

c. Calculate working capital and the current ratio for each of the past three years. (Enter your answers in millions (i.e., 5,000,000 should be entered as 5). Round "Current ratio" to 1 decimal place.)

d. Calculate earnings per share for 2017 and 2016. (Round your answers to 2 decimal places.)

e. If Wiper's stock had a price/earnings ratio of 12 at the end of 2017, what was the market price of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

f. Calculate the cash dividend per share for 2017 and the dividend yield based on the market price calculated in part e. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

g. Calculate the dividend payout ratio for 2017. (Do not round intermediate calculations.)

h. Assume that accounts receivable at December 31, 2017, totaled $329 million. Calculate the number of days' sales in receivables at that date. (Use 365 days a year. Do not round intermediate calculations.)

i. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2017 and 2016. (Round "Debt ratio" to 1 decimal place and "Debt/equity ratio" to the nearest whole percent.)

j. Calculate the times interest earned ratio for 2017 and 2016. (Round your answers to 1 decimal place.)

Answer 1

a. Calculate return on investment, based on net income and average total assets, for 2017 and 2016.

return on investment=net income/average total assets

average total assets 2017 =(3262+3011)/2=3136.50

average total assets 2016=(3011+2672)/2=2841.50

return on investment 2017=251/3136.50=8.00%

return on investment 2016=246/2841.50=8.7%

b. Calculate return on equity for 2017 and 2016

return on equity=Net income/average Stockholders’ equity

average Stockholders’ equity 2017 =(1027+1046)/2=1036.50

average Stockholders’ equity 2016=(938+1046)/2=992

return on equity 2017=251/1036.50=24.2%

return on equity 2016=246/992=24.8%

c. Calculate working capital and the current ratio for each of the past three years.

working capital=Current Asset -Current Liabilites

	2017	2016	2015
Current Asset	829	1071	933
Current Liabilites	597	850	752
working capital	232	221	181
current ratio	1.4	1.3	1.2

d. Calculate earnings per share for 2017 and 2016.

earnings per share=Net income/Average number of common shares outstanding

	2017	2016
Net income	251	246
Average number of common shares outstanding	43.3	48.7
Earnings per share	5.8	5.1