Question

Homework: 4-2 MyFinanceLab Assignment Save 6 of 12 (12 complete) HW Score: 67.41%, 33.7 of 50 pts Score: 0 of 4 pts X P4-8 (similar to) Question Help Related to Checkpoint 4.1 Analyzing Profitability in 2016, the Alien Corporation had sales of $64 million total assets of $42 million and total abilities of $15 milion. The interest on the company's debt is 6 percent and its tax rate is 35 percent The operating profit marginis 11 percent a. Comote the firm's 2016 met operating income and net income b. Calcutefois operating rumons and return on equity, Hint You can assume that interest must be paid on all of the firm's ) a. Com the 2016 e n come and not income The Sims 2016 net operating income is 5704 million Round to two decimal places) The tos 2016 net income in 32 milion Round to two decimal places) LLG -DITECH-1

Answer 1

a). Operating Profit Margin = Operating Income / Sales

0.11 = Operating Income / $64 million

Operating Income = 0.11 * $64 million = $7.04 million

Net Income = [Operating Income - Interest] * [1 - t]

= [7.04 - (15 * 0.061)] * [1 - 0.35]

= 6.125 * 0.65 = $3.98 million

b). Operating Return on Assets = Operating Income / Total Assets = 7.04 / 42 = 0.1676, or 16.76%

Return on Equity = Net Income / Common Equity

= 3.98 / [42 - 15] = 0.1475, or 14.75%