Question

Last year Huntington Inc. had sales of $325,000 and a net income of $29,000, and its...

Last year Huntington Inc. had sales of $325,000 and a net income of $29,000, and its year-end assets were $250,000. The firm's total-debt-to-total-capital ratio was 18.0%. The firm finances using only debt and common equity and its total assets equal total invested capital. Based on the DuPont equation, what was the ROE? Do not round your intermediate calculations.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

As per Dupont equation Return on equity (Roe) =

Net profit margin * Asset turnover * equity multiplier

Net profit margin = Net income / sales = (29000 / 325000) * 100 = 8.9%

Asset turnover = Sales / total assets = 325000 / 250000 = 1.3

Equity multiplier =Total assets / Total equity shareholders fund

Total debt = Total assets(capital) * Total debt to total assets ratio = 250000* 18% = 45000

Total equity = Total assets - debt = 250000- 45000 = 205000

Equity multiplier = 250000/205000 = 1.22

ROE = 0.089 * 1.3 * 1.22 =0.14 or 14%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Last year Vaughn Corp. had sales of $315,000 and a net income of $17,832, and its...
Last year Vaughn Corp. had sales of $315,000 and a net income of $17,832, and its year-end assets were $210,000. The firm's total-debt-to-total-assets ratio was 10%. Based on the DuPont equation, what was Vaughn's ROE? Select the correct answer. a. 9.95% b. 10.99% c. 9.43% d. 11.51% e. 10.47%
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of...
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $270,000 and its net income was $10,600. The firm finances using only debt and common equity, and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its...
BEP, ROE, AND ROIC Broward Manufacturing recently reported the following information: Net income $325,000 ROA 10%...
BEP, ROE, AND ROIC Broward Manufacturing recently reported the following information: Net income $325,000 ROA 10% Interest expense $126,750 Accounts payable and accruals $950,000 Broward's tax rate is 30%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Round...
Last year Ann Arbor Corp had $240,000 of assets (which equals total invested capital), $305,000 of...
Last year Ann Arbor Corp had $240,000 of assets (which equals total invested capital), $305,000 of sales, $20,000 of net income, and a debt-to-total-capital ratio of 37.5%. The new CFO believes that a new computer program will enable the company to reduce costs and thus raise net income to $33,000. The firm finances using only debt and common equity. Assets, total invested capital, sales, and the debt to capital ratio would not be affected. By how much would the cost...
Last year Ann Arbor Corp had $155,000 of assets (which equals total invested capital), $305,000 of...
Last year Ann Arbor Corp had $155,000 of assets (which equals total invested capital), $305,000 of sales, $20,000 of net income, and a debt-to-total-capital ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. The firm finances using only debt and common equity. Assets, total invested capital, sales, and the debt to capital ratio would not be affected. By how much would the cost reduction improve...
The ROE of Concrete Pumping Holdings, Inc. is equal to 10% and ROA is equal to...
The ROE of Concrete Pumping Holdings, Inc. is equal to 10% and ROA is equal to 8%. The firm finances only with short-term debt, long-term debt, and common equity, so assets equal total invested capital. What is the firm's total debt to total capital ratio. Select one: a. 75% b. 80% c. 20% d. 25% e. 40%
Last year Jandik Corp. had $250,000 of assets (which is equal to its total invested capital),...
Last year Jandik Corp. had $250,000 of assets (which is equal to its total invested capital), $18,750 of net income, and a debt-to-total-capital ratio of 37%. Now suppose the new CFO convinces the president to increase the debt-to-total-capital ratio to 48%. Sales, total assets and total invested capital will not be affected, but interest expenses would increase. However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged....
using excel sheet to calculate 1. Firm A's sales last year = $280,000, net income =...
using excel sheet to calculate 1. Firm A's sales last year = $280,000, net income = $23,000.  What was its profit margin? (8.21%) 2. Firm A’s total assets = $415,000 and its net income = $32,750.  What was its return on total assets (ROA)?(7.89%) 3. Firm A’s total common equity = $405,000 and its net income = $70,000.  What was its ROE? (17.28%) 4. Firm A’s stock price at the end of last year = $23.50 and its earnings per share for the...
Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 275,000...
Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 275,000 shares outstanding, and its debt/total invested capital ratio was 44%. The firm finances using only debt and common equity, and its total assets equal total invested capital. How much debt was outstanding? Do not round your intermediate calculations. a. $5,013,938 b. $5,358,031 c. $4,915,625 d. $4,768,156 e. $4,571,531
Baker Industries’ net income is $24,000, its interest expense is $4,000, and its tax rate is...
Baker Industries’ net income is $24,000, its interest expense is $4,000, and its tax rate is 35%. Its notes payable equals $25,000, long-term debt equals $80,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm’s ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations. ROE % ROIC %
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT