Question
Asked Mar 25, 2020
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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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Expert Answer

Step 1: Calculate the total assets as follows:

Finance homework question answer, step 1, image 1

Step 2: Calculate the value of equity as follows:

Finance homework question answer, step 2, image 1

Step 3: Calculate the net profit margin as follows:

Finance homework question answer, step 3, image 1

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