Question 3 Digital, Inc. is a major producer of electronic components. Digital uses a LIFO cost-flow assumption for inventories. The company's tax rate is 35%. Below is selected financial data for the company. Digital, Inc. Selected Financial Data December 31, Inventories (LIFO) Total assets Common shareholders' equity 2018 $000 48,454 395,685 102,754 2017 $000 42,369 384,545 98,564 2016 $000 45,388 378,122 89,455 Sales $546,258 $488,965 Cost of goods sold 393,857 348,920 Interest expense 14,253 15,689 Net income 24,581 21,025 The excess of FIFO over LIFO inventories was $25,000,000 on December 31, 2018, $28,500,000 on December 31, 2017 and $22,000,000 on December 31, 2016. Required: (a) Compute the cost of goods sold for Digital, Inc. for years 2018 and 2017 assuming that it had used a FIFO assumption. (6 marks) (b) Compute the rate of return on assets for years 2018 and 2017 based on the reported amounts. Disaggregate ROA into profit margin and asset turnover components. (6 marks) (c) Compute the rate of return on assets for years 2018 and 2017 assuming that Digital, Inc. had used the FIFO method of accounting for inventories. Disaggregate ROA into profit margin and asset turnover components. (8 marks) (Total 20 marks)