Condensed Financial Data Are Presented Below for the Phoenix Corporation

question 8

Multiple Choice

Condensed financial data are presented below for the Phoenix Corporation:
$\begin{array}{lrr}&2014&2013\\\text { Accounts receivable } & \$ 267,500 & \$ 230,000 \\\text { Inventory } & 312,500 & 257,500 \\\text { Total current assets } & 670,000 & 565,000 \\\text { Intangible assets } & 50,000 & 60,000 \\\text { Total assets } & 825,000 & 695,000 \\\text { Current liabilities } & 252,500 & 200,000 \\\text { Long-term liabilities } & 77,500 & 75,000 \\\text { Sales } & 1,640,000 & \\\text { Cost of goods sold } & 982,500 & \\\text { Interest expense } & 10,000 & \\\text { Income tax expense } & 77,500 & \\\text { Net income } & 127,500 & \\\text { Cash flow from operations } & 71,000 & \\\text { Cash flow from investing activities } & (6,000) & \\\text { Cash flow from financing activities } & (62,500) & \\\text { Tax rate } & 30 \% &\end{array}$
-If there is no preferred stock,the return on common equity for 2014 is (rounded) :

• A)25.8%
• B)27.9%
• C)41.4%
• D)43.4%

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Definitions:

Prospect Theory

A behavioral economic theory that suggests individuals value gains and losses differently, leading to decisions that can deviate from traditional economic predictions which assume rational behavior.

Behavioral Economics

A field of economics that studies how psychological, cognitive, emotional, cultural, and social factors affect the economic decisions of individuals and institutions.

High Upfront Costs

High Upfront Costs are significant initial expenses incurred before a project, investment, or purchase begins to generate any revenues or savings, often acting as a barrier to entry.

Behavioral Economics

A field of economics that examines how psychological, cognitive, emotional, cultural, and social factors influence the economic decisions of individuals and institutions.