55) Managerial Financial Accounting Assignments P12-6 (a,b) Solution

# 55) Managerial Financial Accounting Assignments P12-6 (a,b) Solution

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P12-6 (a, b)

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Return on Investment, Profit Margin, and Investment Turnover [LO 4] Consider the following information for HandyCraft Stores for 2011 and 2012. 2011 2012 Total assets \$45,000,000 \$51,300,000 Noninterest-bearing current liabilities 4,000,000 4,500,000 Net income 3,500,000 4,500,000 Interest expense 2,200,000 2,700,000 Sales 60,000,000 87,500,000 Tax rate 40% 40% Compute ROI for both years. (Round answer for ROI to 4 decimal places, e.g. 0.1234.) ROI for 2011 [no answer] ROI for 2012 [no answer] P12-6 (a, b)
2011 2012 Net income \$3,500,000 \$4,500,000 Plus interest 2,200,000 2,700,000 Less tax effect of interest 880,000 1,080,000 NOPAT \$4,820,000 \$6,120,000 Total assets \$45,000,000

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Unformatted text preview: \$51,300,000 Less noninterest-bearing current liabilities 4,000,000 4,500,000 Investment \$41,000,000 \$46,800,000 ROI (NOPAT ÷ Investment) 0.1176 Break ROI down into profit margin and investment turnover. (Round answers to 4 decimal places, e.g. 0.1234.) 2011 2012 Profit margin [no answer] [no answer] Investment turnover [no answer] [no answer] Click here if you would like to Show Work for this question 2011 2012 Profit margin (NOPAT ÷ sales) 0.0803 0.0699 Investment turnover (sales ÷ invested capital) 1.4634 1.8697 Profit margin × turnover = ROI* 0.1176 0.1307 *ROI may be off slightly due to rounding...
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## This note was uploaded on 08/02/2011 for the course MGMT 425 taught by Professor Brown/lexner during the Spring '11 term at Kaplan University.

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55) Managerial Financial Accounting Assignments P12-6 (a,b) Solution

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