Here are simplified financial statements for Watervan Corporation:INCOME STATEMENT(Figures in $ millions)Net sales$ 887.00Cost of goods sold747.00Depreciation37.00Earnings before interest and taxes (EBIT)$ 103.00Interest expense18.00Income before tax$ 85.00Taxes17.85Net income$ 67.15BALANCE SHEET(Figures in $ millions) End of YearStart of YearAssets Current assets$ 375$ 324Long-term assets270228Total assets$ 645$ 552Liabilities and shareholders’ equity Current liabilities$ 200$ 163Long-term debt114127Shareholders’ equity331262Total liabilities and shareholders’ equity$ 645$ 552The company’s cost of capital is 8.5%.Required: What is the company’s return on capital? (Use start-of-year rather than average capital.)Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.P.S - Answer is not 17.26%.

Return on capital is calculated by dividing the earnings before interest and taxes with the capital…

Answered: Here are simplified financial…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 18BEA

See similar textbooks

INCOME STATEMENT
(Figures in $ millions)
Net sales	$ 887.00
Cost of goods sold	747.00
Depreciation	37.00
Earnings before interest and taxes (EBIT)	$ 103.00
Interest expense	18.00
Income before tax	$ 85.00
Taxes	17.85
Net income	$ 67.15

BALANCE SHEET
(Figures in $ millions)
	End of Year	Start of Year
Assets
Current assets	$ 375	$ 324
Long-term assets	270	228
Total assets	$ 645	$ 552
Liabilities and shareholders’ equity
Current liabilities	$ 200	$ 163
Long-term debt	114	127
Shareholders’ equity	331	262
Total liabilities and shareholders’ equity	$ 645	$ 552

Required:

What is the company’s return on capital? (Use start-of-year rather than average capital.)

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
P.S - Answer is not 17.26%.

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions