Precious Metal Mining has 3 million in sales its ROE is 17 a

Precious Metal Mining has $3 million in sales, its ROE is 17%, and its total assets turnover is 4x. Common equity on the firm’s balance sheet is 65% of its total assets. What is its net income? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. Do not round intermediate steps.

Solution

Computation Of net income :

Sales / Asset Turnover = Total Assets

$30,00,000 / 4 = Total Assets

$7,50,000 = Total Assets

Total Assets * Equity portion = Total Equity

$7,50,000 * 65% = Total Equity

$4,87,500 = Total Equity

Total Equity * ROE = Net Income

$4,87,500 * 17% = Net Income

$82,875 = Net Income

Net Income = $82,875