Homework hmwk 6 Score 0 of 1 pt Problem 410 similar to 4 of

Homework: hmwk 6 Score: 0 of 1 pt Problem 4-10 (similar to) 4 of 6 (O complete) Hw Score: 0%, 0 of e i Question Help (Evaluating current and pro forma profitability) The annual sales for Salco Inc. were $4.46 million last year. All sales are on credit. The firm\'s end-of-year balance sheet and income statement were in the popup window: EEB a. Calculate Salco\'s total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1.08 million. The firm will maintain its present debt ratio of 0.530 when financing the new investment and expects sales to remain constant. The operating profit margin will rise to 13.5 percent. What will be the new operating return on assets for Salco after the plant\'s renovation? c. Given that the plant renovation in part b accurs and Saloo\'s interest expense rises by $49,000 per year, what will be the returm earned on the common stackholders investment? Compare this rate of retum with that eamed before the renovation. a. Calculate Salco\'s total asset turnover, operating profit margin, and operating return on assets. The total asset turnover is. (Round to two decimal places.)

Solution

Asset turnover = sales/total asset

= 4460000/2058000 = 2.17

operating profit margin = operating income/sales

= 404000/4460000 = 9.06%

operaing ROA = operating income/total asset

= 404000/2058000 = 19.63%