Manning Company Has $1,000,000 in Assets and $1,000,000 in Stockholders

question 10

Essay

Manning Company has $1,000,000 in assets and $1,000,000 in stockholders' equity, with 50,000 shares outstanding the entire year. It has a return on assets ratio of 9%. In the past year it had net income of $75,000. On January 1, 2014, it issued $300,000 in debt at 5% and immediately repurchased 25,000 shares for $300,000. Management expected that, had it not issued the debt, it would have again had net income of $75,000.
Instructions
(a) Determine the Company's net income and earnings per share for 2013 and 2014. (Ignore taxes in your computations.)
(b) Compute the Company's return on common stockholders' equity for 2013 and 2014.
(c) Compute the company's debt to assets ratio for 2013 and 2014.

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Definitions:

Confidence Interval

Newly defined: A measure indicating the reliability of an estimate, often used to infer about the population parameter from sample data.

Sample

A subset of a population used in statistical analysis to estimate the characteristics of the whole population.

Mean

The average value of a set of numbers, calculated by dividing the sum of all the numbers by the count of the numbers.

Standard Error

The usual measure of spread for the distribution that arises from sampling, typically concerning the mean.