SCENARIO 1

The balance sheet and income statement shown below are for Recycled Paper Inc. All figures in millions except Year-end stock price.

BALANCE SHEET
Cash	$ 140.0		Accounts payable	$ 800.0
Accts. receivable	880.0		Notes payable	600.0
Inventories	1,320.0		Accruals	400.0
Total current assets	$2,340.0		Total current liabilities	$1,800.0
			Long-term bonds	1,000.0
			Total debt	$2,800.0
			Common stock (50,000 shares)	200.0
			Retained earnings	1,000.0
Net plant & equip.	1,660.0		Total common equity	$1,200.0
Total assets	$4,000.0		Total liabilities & equity	$4,000.0
INCOME STATEMENT
Net sales	$6,000.0
Operating costs	5,599.8
Depreciation	100.2
EBIT	$ 300.0
Less: Interest	96.0
EBT	$ 204.0
Less: Taxes	81.6
Net income	$ 122.4

OTHER DATA
Shares outstanding	60.00
Common dividends	$42.8
Federal plus state income tax rate	40%
Year-end stock price	$30.60

Use Scenario 1 to answer the question. What is the firm's net profit margin?

A. 6.58%

B. 1.58%

C. 3.74%

D. 2.04%

E. 2.95%