Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 3, Problem 19QP
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DTO, Inc., has sales of $32 million, total assets of $25 million, and total debt of $7 million.
a.
If the profit margin is 6 percent, what is the net income?
b.
What is the ROA?
c.
What is the ROE?
You have the following data for a company. What is the return on assets (ROA)? Return on equity = 15%; Earnings before taxes = $150,000; Total asset turnover = 1.8; Profit margin = 10.5%; Tax rate = 30%.
Red Company has a profit margin of 15 percent on sales of $20,000,000. If the firm has a debt of $7,500,000, total assets of $22,500,000, and an interest cost on a total debt of 5 percent, what is the firm's return on total assets (ROA)? (Round answer to two decimal places.)
Chapter 3 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 3.1 - Why is it often necessary to standardize financial...Ch. 3.1 - Prob. 3.1BCQCh. 3.2 - What are the five groups of ratios? Give two or...Ch. 3.2 - Turnover ratios all have one of two figures as...Ch. 3.2 - Profitability ratios all have the same figure in...Ch. 3.2 - Given the total debt ratio, what other two ratios...Ch. 3.3 - Return on assets, or ROA, can be expressed as the...Ch. 3.3 - Return on equity, or ROE, can be expressed as the...Ch. 3.4 - What does a firms internal growth rate tell us?Ch. 3.4 - What does a firms sustainable growth rate tell us?
Ch. 3.4 - Why is the sustainable growth rate likely to be...Ch. 3.5 - Prob. 3.5ACQCh. 3.5 - Prob. 3.5BCQCh. 3.5 - Prob. 3.5CCQCh. 3.5 - Prob. 3.5DCQCh. 3 - Section 3.1A common-size balance sheet expresses...Ch. 3 - What are the categories of traditional financial...Ch. 3 - Prob. 3.3CCh. 3 - Prob. 3.4CCh. 3 - Prob. 3.5CCh. 3 - Current Ratio. What effect would the following...Ch. 3 - Current Ratio and Quick Ratio. In recent years,...Ch. 3 - Prob. 3CTCRCh. 3 - Financial Ratios. Fully explain the kind of...Ch. 3 - Standardized Financial Statements. What types of...Ch. 3 - Prob. 6CTCRCh. 3 - Prob. 7CTCRCh. 3 - Prob. 8CTCRCh. 3 - Industry-Specific Ratios. So-called same-store...Ch. 3 - Industry-Specific Ratios. There are many ways of...Ch. 3 - Prob. 11CTCRCh. 3 - Financial Statement Analysis. In the previous...Ch. 3 - Prob. 1QPCh. 3 - Calculating Profitability Ratios. Aguilera, Inc.,...Ch. 3 - Calculating the Average Collection Period. Ordonez...Ch. 3 - Calculating Inventory Turnover. Bobaflex...Ch. 3 - Calculating Leverage Ratios. Fincher, Inc., has a...Ch. 3 - Calculating Market Value Ratios. Rossdale, Inc.,...Ch. 3 - Prob. 7QPCh. 3 - DuPont Identity. Jiminy Cricket Removal has a...Ch. 3 - Calculating Average Payables Period. For the past...Ch. 3 - Equity Multiplier and Return on Equity. Shelton...Ch. 3 - Internal Growth. If Williams, Inc., has an ROA of...Ch. 3 - Sustainable Growth. If the Crash Davis Driving...Ch. 3 - Sustainable Growth. Based on the following...Ch. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Calculating Financial Ratios. Based on the balance...Ch. 3 - DuPont Identity. Suppose that the Bethesda Mining...Ch. 3 - Prob. 18QPCh. 3 - Return on Assets. Beckinsale, Inc., has a profit...Ch. 3 - Calculating Internal Growth. The most recent...Ch. 3 - Calculating Sustainable Growth. For Shinoda...Ch. 3 - Total Asset Turnover. Kalebs Karate Supply had a...Ch. 3 - Return on Equity. Carroll, Inc., has a total debt...Ch. 3 - Market Value Ratios. Ames, Inc., has a current...Ch. 3 - Prob. 25QPCh. 3 - Enterprise ValueEBITDA Multiple. The market value...Ch. 3 - Prob. 27QPCh. 3 - Ratios and Fixed Assets. The Smathers Company has...Ch. 3 - Prob. 29QPCh. 3 - Prob. 30QPCh. 3 - Prob. 31QPCh. 3 - Calculating the Times Interest Earned Ratio. For...Ch. 3 - Return on Assets. A fire has destroyed a large...Ch. 3 - Prob. 34QPCh. 3 - SMOLIRA GOLF. INC. 2016 Income Statement Sales...Ch. 3 - Prob. 36QPCh. 3 - Market Value Ratios. Smolira Golf has 10,000...Ch. 3 - Interpreting Financial Ratios. After calculating...Ch. 3 - Growth and Profit Margin. Fulkerson Manufacturing...Ch. 3 - Market Value Ratios. Abercrombie Fitch and...Ch. 3 - Growth and Assets. A firm wishes to maintain an...Ch. 3 - Prob. 42QPCh. 3 - Prob. 43QPCh. 3 - Constraints on Growth. High Flyer, Inc., wishes to...Ch. 3 - Internal and Sustainable Growth Rates. Best Buy...Ch. 3 - Expanded DuPont Identity. Hershey Co. reported the...Ch. 3 - Ratios and Financial Planning at SS Air, Inc....Ch. 3 - Prob. 2CCCh. 3 - Prob. 3CCCh. 3 - Ratios and Financial Planning at SS Air, Inc....
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- Consider a retail firm with a net profit margin of 3.36%, a total asset turnover of 1.88, total assets of $45.5 million, and a book value of equity of $17.6 million. a. What is the firm's current ROE? b. If the firm increased its net profit margin to 4.27%, what would be its ROE? c. If, in addition, the firm increased its revenues by 18% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?arrow_forwardA firm has a ROE of 16.875%, asset turnover of 2.5, and an equity multiplier of 1.5. If the firm has sales revenue of $10,000, what is the net income?arrow_forwardMari Mari Berhad has sales of RM29,000, total assets of RM17,500, and total debt of RM6,300. If the Net Profit Margin is 9%; a) What is the Net Income ? b) What is the Return on Asset ? c) What is the Return on Equities ?arrow_forward
- What is the return on assets? Return on Stockholders' equity? If the firm has a asset turnover ratio of 2.5 times, what is the profit margin/ return of sales? Easter Egg and Poultry Company has $2,000,000 in assets and $1,400,000 of debt. It reports net income of $200,000.arrow_forwardConsider a retail firm with a net profit margin of 3.93 %, a total asset turnover of 1.87, total assets of $42.3 million, and a book value of equity of $18.6 million.a. What is the firm's current ROE?b. If the firm increased its net profit margin to 4.58 %, what would be its ROE?c. If, in addition, the firm increased its revenues by 19 % (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?arrow_forwardUsing the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5 percent and its return on assets (investment) is 22.5 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 55.00 percent, what would the firm's return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 50.00 percent? (Input your answer as a percent rounded to 2 decimal places.)arrow_forward
- Consider a retail firm with a net profit margin of 3.94%, a total asset turnover of 1.84, total assets of $44.9 million, and a book value of equity of $18.3 million. a. What is the firm's current ROE? b. If the firm increased its net profit margin to 4.83%, what would be its ROE? c. If, in addition, the firm increased its revenues by 23% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE? **round to one decimal place**arrow_forwardConsider a retail firm with a net profit margin of 3.71%, a total asset turnover of 1.78, total assets of $45.9 million, and a book value of equity of $18.5 million. a. What is the firm's current ROE? b. If the firm increased its net profit margin to 4.60%, what would be its ROE? c. If, in addition, the firm increased its revenues by 21% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE? a. What is the firm's current ROE? The firm's current ROE is %. (Round to one decimal place.)arrow_forwardButtack Eyes, Inc., has sales of $19 million, total assets of $15.6 million, and total debt of $6.3 million. If the profit margin is 8 percent, what is net income? What is ROA?arrow_forward
- Use this information for Mason Corporation to answer the question that follow. Mason Corporation had $1,030,000 in invested assets, sales of $1,275,000, income from operations amounting to $227,000, and a desired minimum return of 12%. Round the percentage to one decimal place. The profit margin for Mason Corporation is Oa. 22.0% Оb. 17.8% Oc. 12.0% Od. 80.8%arrow_forwardCalculating Profitability Ratios Wims, Inc., has sales of $15.2 million, total assets of $9.8 million, and total debt of $3.7 million. If the profit margin is 6 percent, what is the net income? What is the ROA? What is the ROE?arrow_forwardUsing the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5.5 percent and its return on assets (investment) is 15.5 percent. What is its assets turnover? Note: Round your answer to 2 decimal places. Assets turnover ratio b. If the Butters Corporation has a debt-to-total-assets ratio of 25.00 percent, what would the firm's return on equity be? Note: Input your answer as a percent rounded to 2 decimal places. Return on equity % Return on equity times c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 20.00 percent? Note: Input your answer as a percent rounded to 2 decimal places. $arrow_forward
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