Use the following information to answer Questions 1 through 4:

MegaFrame Computer Company

Balance Sheet

As of December 31, 2007

Assets

Cash $40,000

Accounts Receivable $60,000

Inventory $90,000

New Plant and Equipment $220,000

Total Assets $410,000

Liabilities and Stockholder's Equity

Accounts Payable $60,000

Accrued Expenses $40,000

Long-Term Debt $130,000

Common Stock $60,000

Paid-In Capital $20,000

Retained Earnings $100,000

Total Liabilities and Stockholder's Equity $410,000

MegaFrame Computer Company

Income Statement

For the Year Ended December 31, 2007

Sales (all on credit) $720,000

Cost of Goods Sold $500,000

Gross Profit $220,000

Sales and Administrative Expense $20,000

Depreciation $40,000

Operating Profit $160,000

Interest Expense $16,000

Profit before Taxes $144,000

Taxes (30%) $43,200

Net Income $100,800

Question 1: Refer to the figure above. The firm's average collection period is:

a. 30 days

b. 25 days

c. 14.4 days

d. 20 days

Question 2: Refer to the figure above. Using the DuPont method, return on assets (investment) for MegaFrame Computer is approximately:

a. 15%

b. 25%

c. 29%

d. 35%

Question 3: Refer to the figure above. Compute MegaFrame's after tax profit margin.

a. 10%

b. 14%

c. 15.4%

d. 20%

Question 4: Refer to the figure above. The firm's return on equity is

a. 52.8%

b. 55.6%

c. 56%

d. 100%