Renegade Clothing is struggling to meet analysts' forecasts. It's early December 2024, and the year-end projections...

   

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Renegade Clothing is struggling to meet analysts' forecasts. It's early December 2024, and the year-end projections are in. Listed below are the projections for the year ended 2024 and the comparable actual amounts for 2023. Sales Net income Total assets Total liabilities Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end Projected 2024 Sales Net income $ 14,040,000 830,000 $ 6,970,000 $ 2,490,000 4,480,000 $ 6,970,000 971,000 Analysts forecast earnings per share for 2024 to be $0.88 per share. It looks like earnings per share will fall short of expectations in 2024. Total assets Total liabilities Ronald Outlaw, the director of marketing, has a creative idea to improve earnings per share and the return on equity. He proposes the company borrow additional funds and use the proceeds to purchase some of its own stock-treasury shares. Is this a good idea? Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end Actual 2023 Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.51 million and uses the money to purchase 151,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: $ 16,310,000. 1,137,000 $ 7,170,000 $ 2,580,000 4,590,000 $ 7,170,000 971,000 2024 $ 14,040,000 830,000 $ 6,970,000 $4,000,000 2,970,000 $ 6,970,000 820,000 2023 $ 16,310,000 1,137,000 $ 7,170,000 $ 2,580,000 4,590,000 $ 7,170,000 971,000 2. Calculate the new projected earnings per share and return on equity for 2024, assuming the company goes through with the treasury stock purchase. (Hint: In computing earnings per share, average shares outstanding is now 895,500 = (820,000 + 971,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Required 1 Required 2 Required 3 Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Earnings Per Share Before Purchase Before Purchase. Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 11 11 Amounts Amounts 11 11 Required 2 > Calculate the new projected earnings per share and return on equity for 2024, assuming the company goes through with the treasury stock purchase. (Hint: In computing earnings per share, average shares outstanding is now 895,500 = (820,000 + 971,000) / 2.) After Purchase After Purchase Earnings Per Share Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 Amounts Amounts = Required 3 > Required 1 Required 2 Required 3 Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? < Required 2 Required 3 > Renegade Clothing is struggling to meet analysts' forecasts. It's early December 2024, and the year-end projections are in. Listed below are the projections for the year ended 2024 and the comparable actual amounts for 2023. Sales Net income Total assets Total liabilities Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end Projected 2024 Sales Net income $ 14,040,000 830,000 $ 6,970,000 $ 2,490,000 4,480,000 $ 6,970,000 971,000 Analysts forecast earnings per share for 2024 to be $0.88 per share. It looks like earnings per share will fall short of expectations in 2024. Total assets Total liabilities Ronald Outlaw, the director of marketing, has a creative idea to improve earnings per share and the return on equity. He proposes the company borrow additional funds and use the proceeds to purchase some of its own stock-treasury shares. Is this a good idea? Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end Actual 2023 Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.51 million and uses the money to purchase 151,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: $ 16,310,000. 1,137,000 $ 7,170,000 $ 2,580,000 4,590,000 $ 7,170,000 971,000 2024 $ 14,040,000 830,000 $ 6,970,000 $4,000,000 2,970,000 $ 6,970,000 820,000 2023 $ 16,310,000 1,137,000 $ 7,170,000 $ 2,580,000 4,590,000 $ 7,170,000 971,000 2. Calculate the new projected earnings per share and return on equity for 2024, assuming the company goes through with the treasury stock purchase. (Hint: In computing earnings per share, average shares outstanding is now 895,500 = (820,000 + 971,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Required 1 Required 2 Required 3 Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Earnings Per Share Before Purchase Before Purchase. Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 11 11 Amounts Amounts 11 11 Required 2 > Calculate the new projected earnings per share and return on equity for 2024, assuming the company goes through with the treasury stock purchase. (Hint: In computing earnings per share, average shares outstanding is now 895,500 = (820,000 + 971,000) / 2.) After Purchase After Purchase Earnings Per Share Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 Amounts Amounts = Required 3 > Required 1 Required 2 Required 3 Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? < Required 2 Required 3 >

Answer rating: 100% (QA)

1 Projected Earnings Per Share for 2024 508 per share Return on Equity Not enough informat... View the full answer