Question

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Question 2 Partially correct Mark 1.00 out of 6.00 Remove flag Edit question Compute and Interpret Measures for DuPont Disaggregation Analysis Use the information below for 2018 for 3M Company to answer the requirements (perform these computations from the perspective of a 3M shareholder). ($ millions) 2018 2017 Sales $32,765 Net income, consolidated 5,363 Net income attributable to 3M shareholders 5,349 Assets 36,500 $37,987 Total equity 9,848 11,622 Equity attributable to 3M shareholders 9,796 11,563 a. Compute return on equity (ROE). Round answer to two decimal places (ex: 0.12345 = 12.35%) 54.6 X % b. Compute the DuPont model component measures for profit margin, asset turnover, and financial leverage. • Round profit margin to two decimal places (ex: 0.12345 = 12.35%) • Round asset turnover and financial leverage to three decimal places. Profit margin 16.33 X % Asset turnover 0.88 Financial leverage 3.73 X C. Compute ROA Round answer to two decimal places (ex: 0.12345 = 12.35%) 14.36 X % d. Compute adjusted ROA (assume a statutory tax rate of 22% and pretax net interest expense of $207). Round answer to two decimal places (ex: 0.12345 = 12.35%) 57.78 X %

Answer 1

a)  ROE:    Net Income / Average common equity = 5349 / [9848+11622] / 2 = 49.83%

b) Dupont's Profit Margin ; Net income / sales = 5,363 / 32,765 = 16.37 Dupont's Financial Leverage : Average Total assets / Average shareholders equity    = [ (36,500+37,987) / 2 ] / [ (9,796+11,563) / 2 ] = 37,243.50 / 10,679.50 = 34.875

c) ROA : Net Income / Average Total Assets = 5349 / [ (36,500+37,987) / 2 ] = 5349 / 37,243.50 = 14.36

d) Adjusted ROA : [ Net Income - Pretax Interest Expense - Tax ] / Average Total Assets Net income =   5349 ( - ) Pre tax Interest = (207) _____________ 5,132 ( - ) Tax @ 22 % (1,129.04) _______________ 4,002.96 Adjusted ROA = 4,002.96 / [ (36,500+37,987) / 2 ] = 4,002.96 /  37,243.50 = 10.75