1. The total asset turnover ratio TATO (Sales/TA) of XYZ is 1.60x, its net profit margin (NI/Sales) is 8%, and its debt is half its equity (i.e. D/E ratio is 1/2). The company has $6,000,000 in assets. Calculate XYZ’s return on equity (ROE).
2. The operating profit margin (EBIT/sales) of ABC, Inc. is 18%, its TATO ratio (Sales/ TA) is 1.50x, and its sales are $3,000,000. ABC’s ROE is double its return of assets (ROA). ABC pays 10% interest on all debt and its tax rate is 40%. Calculate the company’s ROA and ROE.
3. XYZ, Inc.’s equity is $800,000. Its ROA is 15% and the ROE is 1.25 times its ROA. Calculate the company’s assets.
4. The gross profit margin (gross profit/sales) of ABC, Inc. is 0.25, its operating profit margin (EBIT/sales) is 14%, its TATO ratio is 1.50x, and its COGS is $600,000. ABC’s tax rate is 40%. If the firm is an all-equity firm, calculate the company’s ROA and ROE.
5. The common stock of NBC, Inc. has a normal P/E ratio of 16x. The company’s ROA is expected to be 9% and ROE is expected to be 18%. The company’s TATO ratio (Sales/ TA) is 1.5x. The company has 80,000 shares of common stock outstanding and its sales are estimated at $1,800,000. Calculate the expected price per share of the company’s common stock.