QUESTION 5

1. The Freeman Company has $80 million of assets which are financed by $30 million of debt and $50 million of equity. Last year net income was $7 million. Calculate what Freeman's return on assets ratio (ROA) would have been if $5 million of the $80 million of assets, financed with debt, had been leased instead of purchased and kept off the balance sheet.

   	a.	8.75%.
   	b.	15.56%.
   	c.	9.33%.
   	d.	28.00%.

QUESTION 6

1. Keating Company had a retained earnings balance of $5,820 at the end of last year. This year the company projects sales of $12,850 with a 6% net profit margin and a 25% dividend payout ratio. Forecast the balance of retained earnings at the end of this year..

   	a.	$6,398.
   	b.	$6,591.
   	c.	$5,627.
   	d.	$578.