Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $310,000 and its net income was $9,000. 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 $11,000 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed? Do not round your intermediate calculations. a. 6.76 p.p. b. 6.21 p.p. c. 3.55 p.p. d. 4.72 p.p. e. 8.26 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 5,400 Accounts receivable 15,000 Inventories 15,600 Total current assets $ 36,000 Net plant and equipment 24,000 Total assets $ 60,000 Liabilities and Equity Accounts payable $ 17,446 Accruals 11,154 Notes payable 7,000 Total current liabilities $ 35,600 Long-term bonds 10,000 Total liabilities $ 45,600 Common stock 2,880 Retained earnings 11,520 Total common equity $ 14,400 Total liabilities and equity $ 60,000 Income Statement (Millions of $) 2021 Net sales $ 108,000 Operating costs except depreciation 100,440 Depreciation 1,920 Earnings before interest and taxes (EBIT) $ 5,640 Less interest 1,020 Earnings before taxes (EBT) $ 4,620 Taxes (25%) 1,155 Net income $ 3,465 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,212.75 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $83.16 What is the firm's profit margin? Do not round your intermediate calculations. a. 5.22% b. 9.40% c. 5.78% d. 3.45% e. 3.21%

Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $310,000 and its net income was $9,000. 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 $11,000 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed? Do not round your intermediate calculations. a. 6.76 p.p. b. 6.21 p.p. c. 3.55 p.p. d. 4.72 p.p. e. 8.26 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 5,400 Accounts receivable 15,000 Inventories 15,600 Total current assets $ 36,000 Net plant and equipment 24,000 Total assets $ 60,000 Liabilities and Equity Accounts payable $ 17,446 Accruals 11,154 Notes payable 7,000 Total current liabilities $ 35,600 Long-term bonds 10,000 Total liabilities $ 45,600 Common stock 2,880 Retained earnings 11,520 Total common equity $ 14,400 Total liabilities and equity $ 60,000 Income Statement (Millions of $) 2021 Net sales $ 108,000 Operating costs except depreciation 100,440 Depreciation 1,920 Earnings before interest and taxes (EBIT) $ 5,640 Less interest 1,020 Earnings before taxes (EBT) $ 4,620 Taxes (25%) 1,155 Net income $ 3,465 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,212.75 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $83.16 What is the firm's profit margin? Do not round your intermediate calculations. a. 5.22% b. 9.40% c. 5.78% d. 3.45% e. 3.21%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 13P

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Question

a. 6.76 p.p.

b. 6.21 p.p.

c. 3.55 p.p.

d. 4.72 p.p.

e. 8.26 p.p.

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)	2021
Assets
Cash and securities		$	5,400
Accounts receivable			15,000
Inventories			15,600
Total current assets		$	36,000
Net plant and equipment			24,000
Total assets		$	60,000

Liabilities and Equity
Accounts payable		$	17,446
Accruals			11,154
Notes payable			7,000
Total current liabilities		$	35,600
Long-term bonds			10,000
Total liabilities		$	45,600
Common stock			2,880
Retained earnings			11,520
Total common equity		$	14,400
Total liabilities and equity		$	60,000

Income Statement (Millions of $)	2021
Net sales		$	108,000
Operating costs except depreciation			100,440
Depreciation			1,920
Earnings before interest and taxes (EBIT)		$	5,640
Less interest			1,020
Earnings before taxes (EBT)		$	4,620
Taxes (25%)			1,155
Net income		$	3,465

Other data:
Shares outstanding (millions)			500.00
Common dividends (millions of $)		$1,212.75
Int. rate on notes payable & L-T bonds			6%
Federal plus state income tax rate			25%
Year-end stock price			$83.16

What is the firm's profit margin? Do not round your intermediate calculations.

a. 5.22%

b. 9.40%

c. 5.78%

d. 3.45%

e. 3.21%

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