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3. Some of MasterToy's financial statements data are provided below. Using the data: 1) Calculate each of the five components of the DuPont decomposition of
3. Some of MasterToy's financial statements data are provided below. Using the data: 1) Calculate each of the five components of the DuPont decomposition of return on equity (ROE) and the ROE for both 2015 and 2018 (ROE is defined as net income/year-end equity for this problem). (10 = 5 + 5 marks) 2) Assuming the market interest rate on long-term debt for MasterToy is about 20% in 2018. Briefly discuss the impact of the changes in MasterToy's operations and financial leverage on the change in its ROE from 2015 to 2018. (10 marks) 2015 2018 Income Statement Data Revenues $542 $979 Operating income (EBIT) $35 $67 Interest expense 3 0 Pretax income $32 $67 Income taxes 13 37 Net income after tax $19 30 Balance Sheet Data Fixes assets $41 $70 Total assets 245 291 Working capital 123 157 Long-term debt 16 0 Total shareholders' equity 159 220
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