Question: 1. A fire has destroyed many of the financial records at Anderson Associates. You are assigned to piece together information to prepare a financial report. You have found that the firm's return on equity is 12 percent and its debt ratio is .40. What is its return on assets?
2. Pinkerton Packaging's ROE last year was 2.5 percent, but its management has developed a new operating plan designed to improve things. The new plan calls for a total debt ratio of 50 percent, which will result in interest charges of $240 per year. Management projects an EBIT of $800 on sales of $8,000, and it expects to have a total assets turnover ratio of 1.6. Under these conditions, the federal-plus-state tax rate will be 40 percent. If the changes are made, what return on equity will Pinkerton earn?
3. Henderson Chemical Company has $5 million in sales. Its ROE is 10 percent and its total assets turnover is 2.5. The company is 60 percent equity financed. What is the company's net income?