Question

Problems 6-10 Determining profitability (LO6-4) Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. In 2017, Nucor's net income was higher by $175.2 million because of a one-time effect of the Tax Cuts and Jobs Act. Nucor Corporation ($ in millions) Total assets Common stockholders' equity Total debt Sales Net income Interest expense Assumed marginal income tax rate 2015 $14,327.0 7,849.9 4,388.5 2016 $15, 223.5 8,254.7 4,357.1 16, 208.1 900.4 169.2 0.37 2017 $15, 841.3 9,084.8 3,795.1 20,252.4 1,380.6 173.6 0.37 2018 $17,920.6 10,202.0 4,291.1 25,067.3 2,481.1 135.5 0.23 Source: Nucor Form 10-Ks for 2015-2018. Required: In the following analyses, eliminate the one-time net income effect of the Tax Cuts and Jobs Act on 2017's results. 1. Calculate Nucor's ROA for 2016, 2017, and 2018. 2. Decompose ROA into operating profit margin and asset turnover components. 3. Has Nucor's profitability changed over the three years? 4. Calculate the rate of return on common stockholders' equity for 2016, 2017, and 2018.

Answer 1

Sol 2016 2017 2018 1. Calculation of ROA bol 2018 2016 2017 16880.99 15532.4 14775.25 2 9) Aug assete Copening ). 94 (14227715223) (152234 15€43) (15841237 1929) 2 2 9643.4 8669.75 8052-3 D Avg equity Common stock holders opening equity & closing Copeni (1849 +8254) B254 +9084) (9084+10203 2 2 2 25067.3 20252.4 () sales 16 208) 2585.05 1489.96 1006:59 d) EB)= Net income + Int{1+tax] (900+ 169.21-023] [1280-641721075-7] 24 ose 0.1531 0.095 0.068 ROA ola о a Bo Decomposi hon Ob ROA ROA into operating probit margin & asset Components turnover 0.103 0.073 0.062 I operating probit margin d с C 10484 1303 1.096 Asset turnover haho С C д a

in 1 increasing 3. yes the probitability has changing from to 2018. trend 2016 to 2017 Common stark holders 4. Calculation of rate ob return on equitu 2018 2017 2016 9643.4 866975 805203 Ang common Stock holdes equitur Cas Calcelated above-b) 1380.6 24861 900.4 Net income 0.257 0.159 o.lll 248111 (1380.6 Late of return Net income Ang common stock (23462:6 (1280-6 1900.4 8052.3) 9643.4 8669.75 holders equity