Question

In: Accounting

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016. the Allen Corporation had sales of $62 million, total assets of $48 million, and total

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016. the Allen Corporation had sales of $62 million, total assets of $48 million, and total liabilities of S22 million. The interest rate on the company's debt is 6.1 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.

Expert Solution

a)

Operating Profit margin = Operating Profit / Sales

Operating Profit Margin = 14%

Sales = $ 62000000

Operating Profit = 62000000 * 14%

Operating Profit = $8680000

Operating Profit	8680000
(-) Interest	(1342000)
EBT	7338000
(-)Taxes	(2568300)
Net income	$ 4769700

Interest = 22000000 * 6.1% = 1342000

b)

Operating return on Asset = Operating Income / Assets

Operating return on Asset = 8680000 / 48000000

Operating return on Asset = 0.1808 or 18.08%

Total Assets = Total liabilities + Total Equity

48000000 = 22000000 + Total Equity

Total Equity = 48000000 - 22000000

Total Equity = $26000000

Return on Equity = Net income / Equity * 100

Return on Equity = 4769700 / 26000000 * 100

Return on Equity = 18.35%

a. Interest = 22000000 * 6.1% = 1342000

b. Return on Equity = 18.35%

Junaid answered 1 year ago

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $68 million,...

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $68 million, total assets of $43 million, and total liabilities of $16 million. The interest rate on the company's debt is 5.5 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...

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $ 66million,...

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $ 66million, total assets of $ 50 million, and total liabilities of 21million. The interest rate on the company's debt is 5.6percent, and its tax rate is 35percent. 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...

(Analyzing Profitability) In 2016, the Allen Corporation had sales of $ 61$61 million, total assets of...

(Analyzing Profitability) In 2016, the Allen Corporation had sales of $ 61$61 million, total assets of $ 50$50 million, and total liabilities of $ 20$20 million. The interest rate on the company's debt is 5.85.8 percent, and its tax rate is 3535 percent. The operating profit margin is 1212 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...

In 2016, the Allen Corporation had sales of $ 62 million, total assets of $ 45...

In 2016, the Allen Corporation had sales of $ 62 million, total assets of $ 45 million, and total liabilities of $ 25 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 14 percent. 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.) The firm's 2016 net income is...

In 2016, the Allen Corporation had sales of $62 million, total assets of $45 million, and...

In 2016, the Allen Corporation had sales of $62 million, total assets of $45 million, and total liabilities of $25 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 14 percent. 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.) (round answer to 2 decimal places)

In 2016, the Allen Corporation had sales of $61 million, total assets of $44 million, and...

In 2016, the Allen Corporation had sales of $61 million, total assets of $44 million, and total liabilities of $17 million. The interest rate on the company's debt is 5.7 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...

In 2016, the Allen Corporation had sales of $ 60 million, total assets of $ 45...

In 2016, the Allen Corporation had sales of $ 60 million, total assets of $ 45 million, and total liabilities of $ 23 million. The interest rate on the company's debt is 5.9 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...

In 2016, the Allen Corporation had sales of $60 million, total assets of $50 million, and total liabilities of $16 million.

In 2016, the Allen Corporation had sales of $60 million, total assets of $50 million, and total liabilities of $16 million. The interest rate on the company's debt is 5.7%, and it's tax rate is 35%. The operating profit margin is 13%.Please answer: 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 $62 milion, total assets of $42 milion, and total liablities of $21 milion

(Related to Checkpoint 4.3) (Analyzing Profitability) In 2016, the Allen Corporation had sales of $62 milion, total assets of $42 milion, and total liablities of $21 milion. The interest rate on the company's debt is 6.1 percent, and its tax rate is 35 percent. The operating profit margin is 11 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...

(Evaluating profitability) The Malia Corporation had sales in 2019 of $60 million, total assets of $46...

(Evaluating profitability) The Malia Corporation had sales in 2019 of $60 million, total assets of $46 million, and total liabilities of 15 million. The interest rate on the company’s debt is 6 percent and its tax rate is 21 percent. The operating profit margin was 11.8 percent. What were the company’s operating income and net income? What was the operating return on assets and return on equity? Assume that interest must be paid on all of the debt. The operating...