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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. SEE ATTACHED Analysts forecast earnings per share for 2024 to be $0.93 per share. It looks like earnings per share will fall short of expectations in 2024. 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? Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.19 million and uses the money to purchase 119,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: SEE IMAGE ATTACHED 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 894,500 = (835,000 + 954,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio?

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. SEE ATTACHED Analysts forecast earnings per share for 2024 to be $0.93 per share. It looks like earnings per share will fall short of expectations in 2024. 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? Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.19 million and uses the money to purchase 119,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: SEE IMAGE ATTACHED 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 894,500 = (835,000 + 954,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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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.

SEE ATTACHED

Analysts forecast earnings per share for 2024 to be $0.93 per share. It looks like earnings per share will fall short of expectations in 2024.

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?

Required:
1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock.

Now assume Renegade Clothing borrows $1.19 million and uses the money to purchase 119,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: SEE IMAGE ATTACHED

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 894,500 = (835,000 + 954,000) / 2.)

3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio?

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 Analysts forecast earnings per share for 2024 to be $0.93 per share. It looks like earnings per share will fall short of expectations in 2024. Projected 2024 $ 14,970,000 854,000 $ 7,260,000 $ 2,770,000 4,490,000 $ 7,260,000 954,000 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? Sales Net income Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.19 million and uses the money to purchase 119,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: Total assets Total liabilities Actual 2023 $ 16,170,000 1,136,000 $ 7,130,000 $ 2,720,000 4,410,000 $ 7,130,000 954,000 Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end 2024 $ 14,970,000 854,000 $ 7,260,000 $ 3,960,000 3,300,000 $ 7,260,000 835,000 2023 $ 16,170,000 1,136,000 $ 7,130,000 $ 2,720,000 4,410,000 $ 7,130,000 954,000 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 894,500 = (835,000 +
Transcribed Image Text: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 Analysts forecast earnings per share for 2024 to be $0.93 per share. It looks like earnings per share will fall short of expectations in 2024. Projected 2024 $ 14,970,000 854,000 $ 7,260,000 $ 2,770,000 4,490,000 $ 7,260,000 954,000 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? Sales Net income Required: 1. Calculate the projected earnings per share and return on equity for 2024 before any purchase of stock. Now assume Renegade Clothing borrows $1.19 million and uses the money to purchase 119,000 shares of its own stock at $10 per share. The projections for 2024 will change as follows: Total assets Total liabilities Actual 2023 $ 16,170,000 1,136,000 $ 7,130,000 $ 2,720,000 4,410,000 $ 7,130,000 954,000 Stockholders' equity Total liabilities and stockholders' equity Shares outstanding at year-end 2024 $ 14,970,000 854,000 $ 7,260,000 $ 3,960,000 3,300,000 $ 7,260,000 835,000 2023 $ 16,170,000 1,136,000 $ 7,130,000 $ 2,720,000 4,410,000 $ 7,130,000 954,000 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 894,500 = (835,000 +
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 894,500 = (835,000 + 954,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Complete this question by entering your answers in the tabs below. Required 1 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 894,500 = (835,000 + 954,000) / 2.) After Purchase Required 3 After Purchase Earnings Per Share Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 Amounts Amounts Required 3 > 0 0%
Transcribed Image Text: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 894,500 = (835,000 + 954,000) / 2.) 3. Does the purchase of treasury stock near year-end improve earnings per share and the return on equity ratio? Complete this question by entering your answers in the tabs below. Required 1 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 894,500 = (835,000 + 954,000) / 2.) After Purchase Required 3 After Purchase Earnings Per Share Numerator/Denominator Return on Equity Numerator/Denominator < Required 1 Amounts Amounts Required 3 > 0 0%
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