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 $764 $981 $843
Other assets 2,424 1,931 1,730
Total assets $3,188 $2,912 $2,573
Current liabilities $588 $841 $ 734
Long-term liabilities 1,582 1,034 910
Stockholders’ equity 1,018 1,037 929
Total liabilities and stockholders' equity $ 3,188 $ 2,912 $ 2,573
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 $3,061 $2,924
Operating income 307 321
Interest expense 95 76
Net income 224 219
Other data:
Average number of common shares outstanding 42.4 47.8
Total dividends paid $61.0 $53.4
Required:
a. Calculate return on investment, based on net income and average total assets, for 2017 and 2016.
b. Calculate return on equity for 2017 and 2016.
c. Calculate working capital and the current ratio for each of the past three years.
d. Calculate earnings per share for 2017 and 2016
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?

Wiper, Inc.

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

                                     2017       2016

Return on investment    7%          8%

b. Return on equity for 2017 and 2016.

                                 2017       2016

Return on equity      22%         21%

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

                                            2017        2016         2015

Working capital                   $176        $140         $109

Current ratio                           1.3          1.2            1.1

d. Earnings per share for 2017 and 2016:

                                       2017     2016

EPS =                            $5.28    $4.58

e. If Wiper's stock had a price/earnings ratio of 12 at the end of 2017, the market price of the stock is:

= $63.36

Explanation:

a) Data and Calculations:

WIPER, INC.

Condensed Balance Sheets

December 31, 2017, 2016, 2015

(in millions)

                                             2017        2016         2015 Average 2017 2016

Current assets                    $764        $981         $843     $872.5       $912

Other assets                      2,424        1,931         1,730   $2,177.5    $1,830.5

Total assets                      $3,188     $2,912     $2,573  $3,050      $2,742.5

Current liabilities                $588        $841       $ 734       $714.5      $787.5

Long-term liabilities           1,582        1,034          910    $1,308        $972

Stockholders’ equity     1,018        1,037         929    $1,027.5     $983

Total liabilities and

stockholders' equity     $ 3,188    $ 2,912   $ 2,573   $3,050     $2,742.5

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                   $3,061 $2,924

Operating income  307       321

Interest expense      95         76

Net income            224        219

Other data:

Average number of common shares outstanding 42.4   47.8

Total dividends paid $61.0   $53.4

a. Return on investment:

2017 = 7% ($224/$3,050 * 100)

2016 = 8% ($219/$2,742.5 * 100)

b. Return on equity:

2017 = 22% ($224/$1,018 * 100)

2016 = 21% ($219/1,037 * 100)

c. Working capital = Current assets Minus Current liabilities

Current Ratio = Current assets/Current liabilities

                                             2017        2016         2015

Current assets                    $764        $981         $843

Current liabilities                $588        $841         $734

Working capital                   $176        $140         $109

Current ratio                           1.3          1.2            1.1

d. Earnings per share = Net income/Outstanding shares

                                    2017        2016

Net income                   224         219

Outstanding shares    42.4        47.8

EPS =                            $5.28    $4.58

e. Price/Earnings ratio = 12 for 2017

Market price = $63.36 ($5.28 * 12)

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