Week one assignment 1 4 10 (Financial ratiosinvestment analysis) The annual sales for Salco Inc were $4 5 million last year The firms end of year balance sheet was as follows Current assets $ 500,000 Liabilities $1,000,000 Net fixed assets 1,500,000 Owners equity 1,000,000 $2,000,000 $2,000,000 The firms income statement for the year was as follows Sales $ 4,500,000 Less cost of goods sold (3,500,000) Gross profit $ 1,000,000 Less operating expenses (500,000) Operating income $ 500,000 Less interest expense (100,000) Earnings before taxes $ 400,000 Less taxes (50 ) (200,000) Net income $ 200,000 a Calculate Salcos total asset turnover, operating profit margin, and operating return on assets b Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million The firm will maintain its present debt ratio of 5 when financing the new investment and expects sales to remain constant The operating profit margin will rise to 13 percent What will be the new operating return on assets for Salco after the plants renovation c Given that the plant renovation in part b occurs and Salcos interest expense rises by $50,000 per Week one assignment 1 4 10 (Financial ratiosinvestment analysis) The annual sales for Salco Inc were $4 5 million last year The firm's end of year balance sheet was as follows Current assets $ 500,000 Liabilities $1,000,000 Net fixed assets 1,500,000 Owners' equity 1,000,000 $2,000,000 $2,000,000 The firm's income statement for the year was as follows Sales $ 4,500,000 Less cost of goods sold (3,500,000) Gross profit $ 1,000,000 Less operating expenses Operating income (500,000) $ 500,000 Less interest expense (100,000) Earnings before taxes $ 400,000 Less taxes (50 ) (200,000) Net income $ 200,000 a Calculate Salco's total asset turnover, operating profit margin, and operating return on assets b Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million The firm will maintain its present debt ratio of 5 when financing the new investment and expects sales to remain constant The operating profit margin will rise to 13 percent What will be the new operating return on assets for Salco after the plant's renovation c Given that the plant renovation in part b occurs and Salco's interest expense rises by $50,000 per

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Week one assignment 1 4-10. (Financial ratiosinvestment analysis) The annual sales for Salco Inc. were $4.5 million last year. The firms end-of-year balance sheet was

Week one assignment 1 4-10. (Financial ratiosinvestment analysis) The annual sales for Salco Inc. were $4.5 million last year. The firms end-of-year balance sheet was as follows: Current assets $ 500,000 Liabilities $1,000,000 Net fixed assets 1,500,000 Owners equity 1,000,000 $2,000,000 $2,000,000 The firms income statement for the year was as follows: Sales $ 4,500,000 Less cost of goods sold (3,500,000) Gross profit $ 1,000,000 Less operating expenses (500,000) Operating income $ 500,000 Less interest expense (100,000) Earnings before taxes $ 400,000 Less taxes (50%) (200,000) Net income $ 200,000 a. Calculate Salcos total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million. The firm will maintain its present debt ratio of .5 when financing the new investment and expects sales to remain constant. The operating profit margin will rise to 13 percent. What will be the new operating return on assets for Salco after the plants renovation? c. Given that the plant renovation in part b occurs and Salcos interest expense rises by $50,000 per image text in transcribed

Week one assignment 1 4-10. (Financial ratiosinvestment analysis) The annual sales for Salco Inc. were $4.5 million last year. The firm's end-of-year balance sheet was as follows: Current assets $ 500,000 Liabilities $1,000,000 Net fixed assets 1,500,000 Owners' equity 1,000,000 $2,000,000 $2,000,000 The firm's income statement for the year was as follows: Sales $ 4,500,000 Less cost of goods sold (3,500,000) Gross profit $ 1,000,000 Less operating expenses Operating income (500,000) $ 500,000 Less interest expense (100,000) Earnings before taxes $ 400,000 Less taxes (50%) (200,000) Net income $ 200,000 a. Calculate Salco's total asset turnover, operating profit margin, and operating return on assets. b. Salco plans to renovate one of its plants, which will require an added investment in plant and equipment of $1 million. The firm will maintain its present debt ratio of . 5 when financing the new investment and expects sales to remain constant. The operating profit margin will rise to 13 percent. What will be the new operating return on assets for Salco after the plant's renovation? c. Given that the plant renovation in part b occurs and Salco's interest expense rises by $50,000 per