Question

Question 44 (1 point) The Chinese communist party has decided to develop Ice Hockey as a national pastime in order to encourage winter exercise for its citizens in its northern provinces. Two firms have decided to build rinks to be first movers in their local markets. Firm A projects a net profit margin in year 3 of 10.00% and a total asset turnover of 3.0 times. Firm B has decided to buy ice-making equipment that is more expensive but uses less power. It projects a net profit margin in year 3 of 12% but a total asset turnover of only 2,0 times. projects a net profit margin of 12%. Firm A's expected ROA is Firm B's exptected ROA is

Answer 1

Firm A's expected ROA is :

ROA = Net profit margin * Total assets turnover = 10% * 3 times = 30%

Firm B's expected ROA is :

ROA = Net profit margin * Total assets turnover = 12% * 2 times = 24%