Question

​(Analyzing Profitability) In​ 2016, the Allen Corporation had sales of $69 ​million, total assets of $42 ​million, and total liabilities of $24 million. The interest rate on the​ company's debt is 5.6 ​percent, and its tax rate is 35 percent. The operating profit margin is 13 percent.

a. Compute the​ firm's 2016 net operating income and net income.

b. Calculate the​ firm's operating return on assets and return on equity.​ (Hint: You can assume that interest must be paid on all of the​ firm's liabilities.)

a. Compute the​ firm's 2016 net operating income and net income.

The​ firm's 2016 net operating income is ?million. ​ (Round to two decimal​ places.)

Answer 1

Sdution As iventhe daty Allen Cerporatten Ltd TOtal Sales $69 Miuom Toka Ase Total Liabiutes $24 Milion mterest bate onthe compays 35% OR 3S Debt S.6%oRO.056 Tax Ralt Opevatia pot mangin= 13 % ORD.13 (a) Compntaton ms 2016 operattf nome and Net Pnwme (P) Operath Inome Opeati profitx Sale^ eperatir ncome O.13 X $69 Milu'on Operahirg Pniom8.97 mILlion. OR EBIT OR 970000 () opeatinlome DR EBIT .9 7mion Len 9nderestgg .3440Mi ate x total yabiuhb, CO05624 MiUin) Earning befave Len Tox (635X7626 Millim) $2. 6691 Miuion. Net Thome 7.6260Miion tax $4.9569 Miuor) . Net ncome4.9569millon R 4956900 12

(b) Comptaton 4m openatna vetum on and Relm Aeset n Operating Retum on sets opeatighome Total Agseb peratRetum onAgset 0.97 Milton $42 Millim OR2136 operati Reum Aslet 21.36 %oR 2136 On Net DniomeNetnome Commun equi Retumon guitz (ROE) Ages Liablut 4.9569 millirn Retum oneuity $4amilim- YMIim ROF4.9569 MiLlion 0.154 OR2754% Retam gul754%0RO275 (RDE)