Harley-Davidson, Inc., is a leading motorcycle manufacturer in the United States. The company...

Question

Harley-Davidson, Inc., is a leading motorcycle manufacturer in the United States. The company manufactures and sells a number of different types of motorcycles, a complete line of motorcycle parts, and brand-related accessories, clothing, and collectibles. In recent years, Harley-Davidson has attempted to expand its dealer network and product lines internationally. The following information is available for three recent years (in millions except per-share amounts):

1. Calculate the following ratios for each year:
a. Rate earned on total assets
b. Rate earned on stockholders’ equity
c. Earnings per share
d. Dividend yield
e. Price-earnings ratio
2. What is the ratio of average liabilities to average stockholders’ equity for Year 3?
3. Explain the direction of the dividend yield and price-earnings ratio in light of Harley-Davidson’s profitability trend.
4. Based on these data, evaluate Harley-Davidson’s strategy to expand to internationalmarkets.

Robert · Accepted Answer

Year 3 Year 2 Year 1
Net Income (Loss) 960$     890$        761$              
Preffered Dividends -$      -$        -$               
Interest Expenses 36.15$  22.72$    17.64$           
Shares Outstanding for computing 
earnings per share
Cash Dividend per share 0.63$    0.41$      0.20$             
Average Total assets 5,369$  5,203$    4,392$           
Average Stockholders equity 3,151$  3,088$    2,595$           
Average Stock price per share 56.12$  54.14$    46.87$           
Working Notes
Calculation of Earning Per Shares (EPS)
Year 3 Year 2 Year 1
Net Income (Loss) 960$        890$              761$            
Less: Preffered Dividends -$        -$               -$             
Less: Interest Expenses 36.15$    22.72$           17.64$        
Earnings for equity shareholders (A) 923.85$  867.28$         743.36$      
Total Shares outstanding (B) 280 295 302
Earning Per Share (A/B) 3.30 2.94 2.46
Answer to Part 1
a. Rate earned on total assets (%)= Earnings for equity shareholders/Total Assets
Year 3 Year 2 Year 1
Earnings for equity shareholders 923.85$         867.28$      743.36$      
Average Total assets 5,369$           5,203$        4,

Harley-Davidson, Inc., is a leading motorcycle manufacturer in the United States. The company manufactures and sells a number of different types of motorcycles, a complete line of motorcycle parts,...

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