1. Dulaneys Stores has posted the following yearly earnings and expenses: EARNINGS AND EXPENSES (YEAR ENDING JANUARY 2012) Sales $50,000,000 Cost of goods sold (COGS) $30,000,000 Pretax earnings $5,000,000 SELECTED BALANCE SHEET ITEMS Merchandise Inventory $2,500,000 Total assets $8,000,000 a. (*) What is Dulaneys current profit margin? What is its current yearly ROA? b. (**) Suppose COGS and merchandise inventory were each cut by 10%. What would be the new pretax profit margin and ROA? c. (**) Based on the current profit margin, how much additional sales would Dulaney have to generate in order to have the same effect on pretax earnings as a 10% decrease in merchandise costs?

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