Question

Please check answers to be sure they are correct. Also, place the answers in bold. Thank you..

Student: Date: Instructor: Course: FIN-320-R2880 Principles of Finance 19EW2 Assignment: 4-2 MyFinanceLab Assignment Bolated to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $70 million total assets of $48 million, and total liabilities of $17 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 12 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. million. (Round to two decimal places.) The firm's 2016 net operating income is $ The firm's 2016 net income is $ million (Round to two decimal places.) b. Calculate the firm's operating return on assets and return on equity. The operating return on assets is %. (Round to two decimal places.) The return on equity is %. (Round to two decimal places.) betonprodhonamg.com

Answer 1

(a) firm's 2016 wet operating income = sales & profit margin → $ 70 million x 12% >> $8.4 million. .. wet operating Inwme - $8.4 million Firm's 2016 net income C$) Amount Particulars 8,4 million net operating income 0.952 million (-) Interest on debt ($17 million X 516%) 7.448 million Balance 2.6068 million (-) Tax Amount (47.448 million x357) 4.84 million Net Income . Net Income = $4,84. millions.

Lib) return on operating Assets = Net Income Total Assets $4.84 million $ 48 million - = 0. 1008 = 10.08% Return on operating assets = 10.08% Return on Equity :- - Net Income shareholder's Equity calculation of Equity : - - From the Accounting Equation :- Equity - Assets - liabilities = $ 48 million - $ 17 million = $ 31 million. Return on Equity - $4.84 million $ 31 million 4.Bu million - 0,1561 Return on equity = 15.61%