Carefree Company

provides

the following

selected

financial information

for

Year 2000:

Sales $17,633

Net Income $405

Interest e

xpense before taxes $245

Preferred stock dividend $27

Tax rate 35%

End of 2000

Beginning of 2000

Total assets

$17,787

$18,048

Preferred stock

333

363

Common shareholders equity

6,037

5,766

(a)

Calculate the ROA for Y

ear 2000.

Disaggregate ROA into the profit margin for ROA and

total assets turnover components.

(b)

Calculate the ROCE for Year 2000

. Disaggregate ROCE into the profit margin for

ROCE, assets turnover, and capital structure leverage components.

(c)

Calculate the amount of

net income available to common stockholders derived from the

use of financial leverage with respect to creditors capital, the amount derived from the

use of preferred shareholders capital, and the amount derived from commo

n

shareholders capital for Year

2000

.

(Hint:

c

alculate

the

return generated by

the

assets

financed by

debt, preferred

equity

,

and

common

equity individually

, then sub

tract the

cost of the corresponding financing.

Debt amount can be recovered using the balance

sheet info.

)

(d)

Did debt

work

to the advantage of the common s

hareholders in Year 2000

?

How about

preferred stock, d

id

it

work to the advantage

of the common shareholders

in Year 2000

?