Question

Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. In 2017, Nucor’s net income was higher by $175.2 million because of a one-time effect of the Tax Cuts and Jobs Act.

	2015	2016	2017	2018
Total Assets	14,327.0	15,223.5	15,841.3	17,920.6
Common Stockhodlers equity	7,849.9	8,254.7	9,084.8	10,202.0
Total Debt	4,388.5	4,357.1	3,795.1	4,291.1
Sales		13,208.1	20,252.4	25,067.3
Net Income		900.4	1,380.6	2,481.1
Interest Expense		169.2	173.6	135.5
Assumed marginal income tax rate		0.37	0.37	0.23
		.

Required:

In the following analyses, eliminate the one-time net income effect of the Tax Cuts and Jobs Act on 2017’s results.

1. Calculate Nucor’s ROA for 2016, 2017, and 2018.
2. Decompose ROA into operating profit margin and asset turnover components.
3. Has Nucor’s profitability changed over the three years?
4. Calculate the rate of return on common stockholders’ equity for 2016, 2017, and 2018.

Answer 1