Current Attempt in Progress

Shown below is the liabilities and stockholders equity section of the balance sheet for Sandhill Company and Teal Company. Each has assets totaling $4,453,000.

Sandhill Co.				TealCo.
Current liabilities		$295,000		Current liabilities		$895,000
Long-term debt, 11%		1,210,000		Common stock ($20 par)		2,810,000
Common stock ($20 par)		2,200,000		Retained earnings (Cash dividends, $332,000)		748,000
Retained earnings (Cash dividends, $225,000)		748,000
		$4,453,000				$4,453,000

For the year, each company has earned the same income before interest and taxes.

		Sandhill Co.		Teal Co.
Income before interest and taxes		$1,190,000		$1,190,000
Interest expense		133,100		0
		1,056,900		1,190,000
Income taxes (20%)		211,380		238,000
Net income		$845,520		$952,000

At year-end, the market price of Sandhills stock was $101 per share, and Teals was $63.50. Assume balance sheet amounts are representative for the entire year. (a) Calculate the return on total assets? (Round answers to 2 decimal places, e.g. 16.85%.)

		Return on total assets
Sandhill Company			%
Teal Company			%

Which company is more profitable in terms of return on total assets? Sandhill CompanyTeal Company (b) Calculate the return on common stock equity? (Round answers to 2 decimal places, e.g. 16.85%.)

		Return on common stock equity
Sandhill Company			%
Teal Company			%

Which company is more profitable in terms of return on common stockholders equity? Sandhill CompanyTeal Company (c) Calculate the Net income per share. (Round answers to 2 decimal places, e.g. $6.85.)

		Net income per share
Sandhill Company		$
Teal Company		$

Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. Sandhill CompanyTeal Company (d1) From the point of view of net income, is it advantageous to the stockholders of Sandhill Co. to have the long-term debt outstanding? NoYes (e) What is the book value per share for each company? (Round answers to 2 decimal places, e.g. $6.85.)

		Book value per share
Sandhill Company		$
Teal Company		$