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WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 2020 2019 2018 Current...

WIPER INC.
Condensed Balance Sheets
December 31, 2020, 2019, 2018
(in millions)
2020 2019 2018
Current assets $ 681 $ 906 $ 753
Other assets 2,415 1,922 1,721
Total assets $ 3,096 $ 2,828 $ 2,474
Current liabilities $ 566 $ 805 $ 712
Long-term liabilities 1,521 995 842
Stockholders’ equity 1,009 1,028 920
Total liabilities and stockholders' equity $ 3,096 $ 2,828 $ 2,474
WIPER INC.
Selected Income Statement and Other Data
For the year Ended December 31, 2020 and 2019
(in millions)
2020 2019
Income statement data:
Sales $ 3,052 $ 2,915
Operating income 298 312
Interest expense 86 67
Net income 197 192
Other data:
Average number of common shares outstanding 41.5 46.9
Total dividends paid $ 52.0 $ 52.5


Required:

  1. Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
  2. Calculate return on equity for 2020 and 2019.
  3. Calculate working capital and the current ratio for each of the past three years.
  4. Calculate earnings per share for 2020 and 2019.
  5. If Wiper's stock had a price/earnings ratio of 12 at the end of 2020, what was the market price of the stock?
  6. Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.
  7. Calculate the dividend payout ratio for 2020.
  8. Assume that accounts receivable at December 31, 2020, totaled $311 million. Calculate the number of days' sales in receivables at that date.
  9. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.
  10. Calculate the times interest earned ratio for 2020 and 2019.

Solutions

Expert Solution

Solution-

2020 2019
Return on investment 6.65% 7.24%
Net income/Average total assets 197/2,962 192/2651
Average total assets (3096+ 2828)/2 (2828+ 2474)/2
2,962 2,651
2020 2019
Return on equity 19.34% 19.71%
Net income/Average stockholders' equity 197/1018.5 192/974
Average stockholders' equity (1009+ 1028)/2 (1028+ 920)/2
1018.5 974
2020 2019 2018
Working capital 115 101 41
Current ratio 1.20 1.12 1.05
Working capital = CA - CL 681-566 906-805 753-712
Current ratio = CA/CL 681/566 906/805 753/712
2020 2019
Earnings per share 4.74 4.09
Net income/Average number of common shares outstanding 197/41.5 192/46.9
Market price $56.88
Price/earnings ratio = Market price/EPS
12= Market price/4.74
Market price = 12 x 4.74 = 56.88
Cash dividends per share $1.25
Dividend yield 2.19%
Cash dividends per share
$52.0/41.5= 1.25
Dividend yield = Dividends paid/Market price
$1.25/$56.88= 2.19%
Dividend payout ratio 26.39%
Dividends paid / Net income
$52.0/ 197= 26.39%
Number of days sales 37.20days
Accounts receivable/Average daily credit sales
$311/($3052/365 days) = 37.20
2020 2019
Debt ratio 67.40% 63.65%
Debt/equity ratio 2.06% 1.75%
Debt ratio
Total debt/Total assets

2087/3096

(1521+566)/3096

1800/2828

(995+805)/2828
Debt/equity ratio
Total debt / Total stockholders' equity 2087/1009 1800/1028
2020 2019
Times interest earned 3.46times 4.65times
Profit before interest & tax / Interest 298/86 312/67

ekkarill92 answered 1 year ago
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