Question

Precious Metal Mining has $16 million in sales, its ROE is 18%, and its total assets turnover is 3.2x. Common equity on the firm’s balance sheet is 60% of its total assets. What is its net income? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. Do not round intermediate steps.

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Hampton Industries had $75,000 in cash at year-end 2015 and $15,000 in cash at year-end 2016. The firm invested in property, plant, and equipment totaling $170,000. Cash flow from financing activities totaled +$210,000. Round your answers to the nearest dollar, if necessary.

1. What was the cash flow from operating activities? Enter cash outflows with a minus sign.
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2. If accruals increased by $35,000, receivables and inventories increased by $200,000, and depreciation and amortization totaled $7,000, what was the firm's net income?
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Answer 1

	PRECIOUS METAL MINING:
	Per Du Pont identity ROE = (Sales/Total assets)*(Net income/Sales)*(Total assets/Equity)
	Substituting available values
	0.18 = 3.2*(Net income/Sales)*(1/0.60)
	Net income/Sales = 0.18*0.6/3.2 =	0.03375
	Net income = Sales*0.03375 = 16000000*0.03375 =	$      5,40,000
	CHECK:
	ROE = 3.2*(540000/16000000)*(1/0.6) =	18.00%
	HAMPTON INDUSTRIES:
a)	Decrease in cash and cash equivalents during the year = 75000-15000 =	$          60,000
	Change in cash and cash equivalents during the year = Cash flow from operating activities+Cash flow from investing activities+Cash flow from financing activities
	Substituting available values, we have
	-60000 = Cash flow from operating activities-170000+210000
	Cash flow from operating activities = +170000-210000-60000 =	$    -1,00,000
b)	-100000 [Cash flow from operating activities] = Net income+35000-200000+7000
	Net income = -100000-35000+200000-7000 =	$          58,000