ZuoTi.Pro
Question

Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Ans 1) ROA is caculated by dividing net income by average total assets = net income/average total assets

Step 1 ) Total average asset = (previous year asset+ current year asset)/2

Particulars 2015 2016 2017 2018
Total Asset 14327 15223.5 15841.3 17920.6
Average Asset (14327+15223.5)/2 (15223.5+15841.3)/2 (15841.3+17920.6)/2
$14775.25 $15532.4 $16880.95

Step2 ) Net income without any one time effect = net income - one time effect of tax cut and job act

Particulars 2015 2016$ 2017 2018
Net Income 900.4 1380.6 2481.1
One Time effect of tax cut and job effect -175.2
Net Income without any one time effect $900.4 $1205.4 $2481.1

Step3) ROA = Net income/Average Total Asset

Particulars 2015 2016 2017 2018
Net Income without any one time effect 900.4 1380.6 2481.1
Average asset 14775.25 15532.4 16880.95
ROA(net income/average total asset) 6% 9% 15%

Ans2) decomposing ROA into operating profit margin and asset turnover component

operating profit margin = Net income /total turnover

Asset turnover = total turnover/average asset

ROA = operating profit margin * Asset Turnover

Net income/Average Total Asset = (Net Profit/Total Sales) * (Total Sales/Average total asset)

Particulars 2015 2016 2017 2018
Average Asset 14775.25 15532.4 16880.95
Total Sales 16208.1 20252.4 25067.3
Net Income without any one time effect 900.4 1380.6 2481.1
Operating Margin ( Net income/Total Sales) 5.56 6.82 9.90
Asset Turnover 1.10 1.30 1.48
ROA (Operating profit margin * Asset Turnover ratio) Approx 6.09 8.89 14.70

Ans 3) Yes, Nucor's profitability has increased on yearly basis. This can be concluded from operating margin calculated above.In addtiion to this net income without considering one time effect also depict increase in the profitability of the organization.

Ans4) Rate of return on common stockholder's equity is calculated as = earnings available to shareholder/ average common stock equity.

Particulars 2015 2016 2017 2018
Net Income without any one time effect 900.4 1380.6 2481.1
common stockholder's equity 7849.9 8254.7 9084.8 10202
Average common stockholder's equity( (previous year equity+current year equity)/2) 8052.3 8669.75 9643.4
Rate of return 11% 16% 26%
0 3
Add a comment
Answer #2

- PART 1


ROA = Earnings before interest and one-time tax benefits


201620172018
Net Income900.41,380.62,481.1

Minus one-time 

tax benefit)

0(175.2)0

Plus Interest 

expense (after-tax)

169.2(1-0.37)

106.596

173.6(1-0.37)

109.368

135.5(1-0.23)

104.335

Earnings Before

Interest (EBI)

1,006.9961,314.7682,585.435

Assets Begining 

of Year 

14,327.015,223.515,841.3

Assets End

of Year 

15,223.515,841.317,920.6

Average Assets

(Begining + Ending)/2

14,775.2515,532.416,880.95

ROA (EBI 

/ Average Assets)

6.82%8.46%15.32%


- PART 2


To calculate operating margin and asset turnover we use these formulas:


Operating profit margin = Earnings before interest EBI / Sales

Asset turnover = Sales / Average Assets


So we can use the calculations we already did to find these values. 



201620172018

Earnings Before

Interest (EBI)

1006.9961314.7682585.435
Sales16,208.120,252.425,067.3

Operating Profit

Margin (EBI/Sales)

6.21%6.49%10.31%

201620172018
Sales16,208.120,252.425,067.3

Average Assets

14,775.2515,532.416,880.95

Asset Turnover 

(Sale/Avg Assets)

1.10


1.30
1.48


- PART 3


Has Nucor's profitability changed over the three years?


Based on their operating profit margin we calculated we can see that their profitability has changed, so yes. 


- PART 4 


The formula for the rate of return on common stockholders' equity is:

(Net Income - Prefered Dividends) / Average Stockholder's Equity


We don't have any preferred dividends in this question so they can be excluded.



201620172018

Net Income (adjust for one time 

tax benifit)

900.4

1,380.6 - 175.2

1205.4

2,481.1

Average 

stockholder's 

equity

(beg se+ end se)/2

(7,849.9 + 

8,254.7) / 2

8,052.3

(8,254.7 +

9,084.8) / 2

8,669.75

(9,084.8 +

10,202.0) / 2

9,643.4

Return on Common

Stockholder's Equity

(ROCE)

11.18%
13.90%25.73%


source: Working on this problem in an online textbok
answered by: Everett Greenwood
3 0
Add a comment
Know the answer?
Add Answer to:
Nucor Corporation produces steel and steel products at its eight mills and is a major recycler...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Nucor Corporation produces steel and steel products at its eight mills and is a major recycler...

    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 million) Total santo Connon stockholders' equity Total debt Sales Net income Interest expense Assumed marginal income tax rate 2015 $14,327.0 7.849.9 4,300.5 2016 015, 223.5 8.254.7 4,357.1...

  • Problems 6-10 Determining profitability (LO6-4) Nucor Corporation produces steel and steel products at its eight mills...

    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...

  • Nucor Corporation produces steel and steel products at its eight mills and is a major recycler...

    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. 2011 Nucor Corporation ($ in millions) Total assets Common stockholders' equity Total debt Sales Net income Interest expense Income tax rate 2011 $14,570.4 7,706.6 4,282.0 2012 $14, 152.1 7,885.4 3,660.1 19,429.3 593.1 162.4 0.37 2013 $15, 203.3 7,910. 3 4,409.9 19,052.0 585.5 146.9 0.37 2014 $15,615.9 8 ,075.1 4,584.4 21,105.1 815.8 169.3...

  • Conlin Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $300,000...

    Conlin Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $300,000 35% $105,000 2016 325,000 30 97,500 2017 400,000 30 120,000 In 2018, Conlin suffered a net operating loss of $480,000, which it elected to carry back. The 2018 enacted tax rate is 29%. Prepare Conlin’s entry to record the effect of the loss carryback.

  • Bramble Corporation began operations on January 1, 2014. During its first 3 years of operations, Bramble...

    Bramble Corporation began operations on January 1, 2014. During its first 3 years of operations, Bramble reported net income and declared dividends as follows: Net income $47,600 132,500 165,000 Dividends declared 2014 2015 2016 57,700 52,900 The following information relates to 2017: Income before income tax Prior period adjustment: understatement of 2015 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Dividends declared (of this amount, $34,700 will be paid on January 15, 2018)...

  • Eddie Zambrano Corporation began operations on January 1, 2017. During its first 3 years of operations,...

    Eddie Zambrano Corporation began operations on January 1, 2017. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows. Net Income Dividends Declared 2014 2015 2016 $ 40,000 $ 125,000 160,000 50,000 50,000 The following information relates to 2017. Income before income tax $ 240,000 Prior period adjustment: understatement of 2015 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods, 25,000 (before taxes) Dividends declared (of this amount, $25,000 will...

  • Cheyenne Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $306,000...

    Cheyenne Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $306,000 34% $104,040 2016 324,000 29% 93,960 2017 393,000 29% 113,970 In 2018, Cheyenne suffered a net operating loss of $488,000, which it elected to carry back. The 2018 enacted tax rate is 28%. Prepare Cheyenne’s entry to record the effect of the loss carryback. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select...

  • Larkspur Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $294,000...

    Larkspur Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $294,000 35% $102,900 2016 332,000 30% 99,600 2017 399,000 30% 119,700 In 2018, Larkspur suffered a net operating loss of $476,000, which it elected to carry back. The 2018 enacted tax rate is 29%. Prepare Larkspur’s entry to record the effect of the loss carryback. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select...

  • Bonita Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $304,000...

    Bonita Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 $304,000 38% $115,520 2016 322,000 33% 106,260 2017 404,000 33% 133,320 In 2018, Bonita suffered a net operating loss of $481,000, which it elected to carry back. The 2018 enacted tax rate is 32%. Prepare Bonita’s entry to record the effect of the loss carryback. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select...

  • On December 31, 2015, Dow Steel Corporation had 730,000 shares of common stock and 43,000 shares ...

    On December 31, 2015, Dow Steel Corporation had 730,000 shares of common stock and 43,000 shares of 9%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $530,000 and $82,000 to common and preferred shareholders, respectively, on December 15, 2016 sold 60,000 common shares. Also, as a part of a 2015 agreement for the On February 28, 2016, Dow acquisition of Merrill Cable Company, another 24,000 shares...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT