In 2016, the Allen Corporation had sales of $61 million, total assets of $43 million, and total liabilities of $15 million. The interest rate on the company's debt is 5.8 percent, and its tax rate is 35 percent. The operating profit margin is 14 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.)
In 2016, the Allen Corporation had sales of $61 million, total assets of $43 million, and total liabilities of $15 million. The interest rate on the company's debt is 5.8 percent, and its tax rate is 35 percent. The operating profit margin is 14 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.)
Chapter2: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 12P
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Question
In 2016, the Allen Corporation had sales of
$61
million, total assets of
$43
million, and total liabilities of
$15
million. The interest rate on the company's debt is
5.8
percent, and its tax rate is
35
percent. The operating profit margin is
14
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.)
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