Do a ratio decomposition analysis for the Mordett corporation of Concept Check 1, 14.2 preparing a table similar to Table 14.6.

Concept Check 1

Mordett is a company with the same assets as Nodett and Somdett but a debt/equity ratio of 1.0 and an interest rate of 9%. What would its net profit and ROE be in a bad year, a normal year, and a good year?

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TABLE 14.6 Ratio decomposition analysis for Nodett and Somdett Bad year Nodett Somdett Normal year Nodett Somdett Good year Nodett Somdett ROE 0.030 0.018 0.060 0.068 0.090 0.118 (1) Net Profit Pretax Profit 0.6 0.6 0.6 0.6 0.6 0.6 (2) Pretax Profit EBIT 1.000 0.360 1.000 0.680 1.000 0.787 (3) EBIT Sales (Margin) 0.0625 0.0625 0.100 0.100 0.125 0.125 (4) Sales Assets (Turnover) 0.800 0.800 1.000 1.000 1.200 1.200 (5) Assets Equity 1.000 1.667 1.000 1.667 1.000 1.667 (6) Compound Leverage Factor (2) × (5) 1.000 0.600 1.000 1.134 1.000 1.311