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Wendy F X Secure htps:/www.mathul.com/Student/Payertlomeworkaspthomeworkld-451492198questionld-108fushed-fakedicld-489274back-Dokss pSNUSouthem New HamNwTab Unted Stuter Postal When To Sel A Mu FIN-320-05132 Principies of Finance 18EW5 Wendy Franey&1 6/2618 7:41 PM Homework: 4-2 MyFinanceLab Assignment Score: 2 of 4 pts 6 of 12 (12 complete) Y HW Score: 78 57%, 39 29 of 50 pts % P4-8 (similar to) Question Help Chr Related to Checkpoint 43) (Analying Profinability) n 2016. the Alion Corporation had sales of5ilion total assets of $50 milion and total labities of $23 milion The interest rats on the companys dabei 5 6 percent, and its tax rate is 35 percent. The operating prott marge is 13 percert a. Compute the fem's 2016 nat operating income and net income b. Calculate the frm's operaing return on assets and relum on equily (Hint You can ssume that intecest muat be paid on atl of the tm's Sabilities) a. Compute the Sems 2016 net opersting income and net income The fr's 2016 net operating income is mition Round to tvo decimal piaces Enter youe ansern he s box and the

Explanation / Answer

a) Operating Income = Operating Margin * Sales

Operating Income = 13% * $69 mil = $8.97 mil

Net Income = Operating Income - Interest Expense - Taxes

Interest Expense = Total liabilities * 5.6% = $1.288 mil

Taxes = ($8.97 mil - $1.288 mil) * 35% = $2.6887 mil

Net Income = ($8.98 - $1.288 - $2.6887) mil = $4.99 mil

b) Operating return on Assets = Operating Income/Total Assets = $8.97 mil/$50 mil = 17.94%

Return on equity = Net Income/Total Equity = 4.99 mil/17 mil = 29.37%

Total Equity = Total Assets - Total Liabilities = $17 mil

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