Answered: PMM has $17 million in sales, its ROE…

PMM has $17 million in sales, its ROE is 17%, and its total asset turnover is 3.2X. Common equity on the firms balance sheet is 50% of its total assets. What is the net income?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 4P

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PMM has $17 million in sales, its ROE is 17%, and its total asset turnover is 3.2X. Common equity on the firms balance sheet is 50% of its total assets. What is the net income?

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Step 1: Calculate the total assets as follows:

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Step 2: Calculate the value of equity as follows:

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Step 3: Calculate the net profit margin as follows:

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Step 4: Calculate the net income as follows:

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