Evaluating Alternative Investments
Response to the following problem:
Judy Snow is considering investing $10,000 and wishes to know which of two companies offers the better alternative
The Hoffman Company earned net income of $63,000 last year on average total assets of $280,000 and average stockholders' equity of $210,000. The company's shares are selling for $100 per share; 6,300 shares of common stock are outstanding.
The McMahon Company earned $24,375 last year on average total assets of $125,000 and average stockholders' equity of $100,000. The company's common shares are selling for $78 per share; 2,500 shares are outstanding.
Which stock should Judy buy?