Financial Analysis

Instructions:
Please make your answers clear. You must show any and all work to receive full credit.
1. A company is contemplating an expansion into a new market. The assets needed to support this expansion are estimated to be worth $760,000. Based on the prediction of financial managers, the company can generate $2,820,000 in annual sales, with a 9 percent net profit margin. What would the return on assets be for the year? (2 pts.)

Note: Please express the result as a percentage and keep two digits after the decimal point (e.g. 12.34% or 1.23%). (add the percentage sign)

2. An appliances company generated a sales revenue of $20,000,000 and a net income of $900,000 in the past fiscal year. Its total assets are $8,000,000, and stockholders’ equity is $4,000,000.

a. What is the net profit margin? (2 pt.)
b. What is the return on assets (ROA)? (2 pt.)
c. What is the return on equity (ROE)? (2 pt.)
d. The total debt ratio is currently 50%. If the net income and total assets stay the same, but the total debt ratio increases to 60%, what would the return on equity be? (2 pt.)

Note: Please express all the ratios as percentages and keep two digits after the decimal point (e.g. 12.34% or 1.23%).