Mahoe Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $500. The market price of common stock at the end of Year 2 was $8.06 per share.
-The company's equity multiplier at the end of Year 2 is closest to:
A) 0.28
B) 1.28
C) 3.53
D) 0.78

Question

Mahoe Corporation has provided the following financial data:
   Dividends on common stock during Year 2 totaled $500. The market price of common stock at the end of Year 2 was $8.06 per share.
-The company's equity multiplier at the end of Year 2 is closest to:
A) 0.28 
B) 1.28 
C) 3.53 
D) 0.78

Quizplus · Accepted Answer

Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,652,500 ÷ $1,292,500 = 1.28 (rounded)
*Average total assets = ($1,675,000 + $1,630,000) ÷ 2 = $1,652,500
**Average stockholders' equity = ($1,305,000 + $1,280,000) ÷ 2 = $1,292,500

Mahoe Corporation Has Provided the Following Financial Data