Option #1: Profitability Analysis Exercises And issues
Do the assigned problems using Summer Peebles, Inc.’s condensed 2014 financial data below:
Assets
Current Assets
$250,000.00
Noncurrent Assets
$1,750,000.00
Total Assets
$2,000,000.00
Liabilities and Equity
Current Liabilities
$200,000.00
Noncurrent Liabilities (8% Bonds)
$675,000.00
Common Stockholders’ Equity
$1,125,000.00
Total Liabilities and Equity
$2,000,000.00
Additional Information:
Net income for 2014 is $157,500.
Income tax rate is 50%.
Amounts for total assets and shareholders’ equity are the same for 2013 and 2014.
All assets and current liabilities are considered to be operating.
Required:
Determine whether leverage (from long-term debt) benefits Rose’s shareholders. (Hint: Examine ROCE with and without leverage.)
Compute the NOPAT and RNOA (use ending NOA).
Demonstrate the favorable effect of leverage given the disaggregation of ROCE and your answer to part (B).
Your submission should:
Be 1-2 pages for the written portion.
Include the Excel spreadsheet with computations.
Clearly separate your responses so your instructor knows the problems you are answering.
What Students Are Saying About Us
.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐"Honestly, I was afraid to send my paper to you, but splendidwritings.com proved they are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"
.......... Customer ID: 14***| Rating: ⭐⭐⭐⭐⭐
"The company has some nice prices and good content. I ordered a term paper here and got a very good one. I'll keep ordering from this website."
