What must happen to asset turnover to leave ROE unchanged from its orginal 14% level if the operating profit margin is reduced from 8% to 5% and the leverage ratio increases from 1.2 to 1.6 ? Asset turnover must be ?
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What must happen to asset turnover to leave
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- JC Goods, Inc. has a profit margin of 10% and a total assets turnover of 0.30. The president believes that the existing return on assets might be quadrupled and is dissatisfied with it. One way to do this is by raising the profit margin to 15%, and another is by raising the total assets turnover.What new asset turnover ratio is necessary to double the return on assets in addition to the 15% profit margin? a. 35%b. 45%c. 40%d. 50%Al-Shamukh Constructors Ltd.currently has sales of OMR 24 million a yearwith a stock level of 25 percent of the sales Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of tocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales then what will be the improvement (or reduction ) in the rate of return on asset in percentage?Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock 20 percent of valueOperating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?
- Western Gas & Electric Co. (WG&E) had sales of $1,550,000 last year on fixed assets of $270,000. Given that WG&E’s fixed assets were being used at only 94% of capacity, then the firm’s fixed asset turnover ratio was? How much sales could Western Gas & Electric Co. (WG&E) have supported with its current level of fixed assets? When you consider that WG&E’s fixed assets were being underused, what should be the firm’s target fixed assets to sales ratio? Suppose WG&E is forecasting sales growth of 22% for this year. If existing and new fixed assets are used at 100% capacity, the firm’s expected fixed assets turnover ratio for this year is?if requires a minimum return on its investments of 15%, what is their residual income? NUBD Co has the following information available for one of its divisions: Average operating assets P5,000,000 Return on investment Sales 40% P8,000,000A company has a profit margin of 25%, an asset turnover ratio of 1.5, and an equity multiplier ratio of 1.65, both the tax burden and the interest burden are at 1, if the profit margin increases to 20% but the asset turnover ratio decreases to 1.3, what will be company’s new ROE?
- Please see attached picture for full problem and the table for answers. a. & b. What is the ROI for each year of the asset's life if the division uses beginning-of-year asset balances and net book value for the computation? What is the residual income each year if the cost of capital is 8 percent? (Enter "ROI" answers as a percentage rounded to 1 decimal place (i.e., 32.1). Negative amounts should be indicated by a minus sign.)A company has a required return of 12%, a profit margin of 4%, a D/E ratio of 0.5 and total asset turnover of 2. Annual dividends last year were $2.00. A) The company has a dividend payout ratio of 20%; calculate the price and forward P/E ratio. B) If the company would have changed its dividend payout ratio to 60%, what would happen to the price and forward P/E ratio? C) What variables are critical to determine if they should increase or decrease their dividend payout ratio? (Hint be specific what variables do you need to know.)The return on equity was barely 3% but the managers prepared a plan to improve the situation. It requires a 60% ratio of total doubt, which will produce interest charges of $ 300 000 annul. They project an EBIT of $ 1 000 000 on sell of $ 10 000 000 and expect to have a total asset turnover ratio of 2.0 Under such conditions the tax rate will be 34% If changes are made, what will the return on equity be?
- Roland Company has a new management team that has developed an operating plan to improve upon last year’s ROE. The new plan would place the debt ratio at 55%, which will result in interest charges of 7,000 per year. EBIT is projected to be 25,000 on sales of 270,000, it expects to have a total asset turnover ration of 3.0, and the average tax rate will be 40%. What does Roland Company expect its return on equity (ROE) to be following the changes?A firm is evaluating an investment in a fixed asset that costs $1,080, has a six-year life, and has no salvage value. Depreciation is straight line to zero over the life of the asset. The firm made the following estimates: price per unit = $12, number of units sold = 40, variable cost per unit = $5, and fixed costs = $60. The tax rate is 25% and the required return is 10%. Fnd the sensitivity of net present value to changes in variable cost per unit.Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2. Refer to the data for Hardwig, Inc.Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10%, but its total assets turnover, debt ratio, interest rate, and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies?