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Ch 3 problems - Comprehensive Problem X YZ Corporation has...

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Comprehensive Problem XYZ Corporation has the following financial information for the previous year: • Sales: $8M, PM = 8%, CA = $2M, FA = $6M, NWC = $1M, LTD = $3M • Compute the ROE using the DuPont Analysis. 3-33 Total assets = CA + FA = $2M + $6M = $8M TAT = Sales / TA = $8M / $8M = 1 NWC =CA-CL CL= CA-NWC=$2M- $IM= $IM Totalliabs. = CL + LTD = $IM + $3M = $4M Total equity = total assets - totalliabs. = $8M - $4M = $4M EM = assets / equity = $8M / $4M = 2 ROE=PMX TAT XEM= 8%X 1 X 2 = 16% Without using DuPont, ROE = NI / total equity = PM * sales / total equity = 8% X $8M/ 4M = 16% 3.33
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Question ABC sells all its merchandise on credit. It has a profit margin of 4%, days sales in receivables of 60 days, receivables of $150,000, total assets of $3 million and a debt ratio of .64. What is the firm's ROE. Assume a 360 day year. DSR = Acct Rec/Sales per day 60 = 150000/(Sales/360) Sales = 900,000 Profit Margin = NT/Sales .04 = NI/900000 NI= 36,000 Debt ratio = Debt! Assets .64 = Debt!3000000 Debt = 1,920,000 Assets - Liabilities = Equity 3,000,000 - 1,920,000 = 1,080,000 ROE = NIlEquity = 36000/1080000 = 0.33 3.34
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Question A firm has total interest charges of $10,000 a year, sales of $1 million, tax rate of 400/0, and net profit rnargin of 6°tlc.
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