Compute the before-tax rate of return on assets

Assignment Help Accounting Basics
Reference no: EM132545279

Question - The Anderson Corporation (an all-equity-financed firm) has a sales level of $280,000 with a 10 percent profit margin before interest and taxes. To generate this sales volume, the firm maintains a fixed-asset investment of $100,000. Currently, the firm maintains $50,000 in current assets.

Required -

a. Determine the total asset turnover for the firm and compute the rate of return on total assets before taxes.

b. Compute the before-tax rate of return on assets at different levels of current assets starting with $10,000 and increasing in $15,000 increments to $100,000.

c. What implicit assumption is being made about sales in Part (b)? Appraise the significance of this assumption along with the policy to choose the level of current assets that will maximize the return on total assets as computed in Part (b).

Reference no: EM132545279

Questions Cloud

What various scenarios can explain the findings : You arrive at a home to find a young man deceased in his bedroom at his parents' home. What various scenarios can explain the findings?
Determine Matrixs taxable income for the year ended : The Matrix Company began operations as of the beginning of 2015. Determine Matrix's taxable income for the year ended December 31, 2015
Find the after-tax cost of capital to dayton for bonds : The bonds would mature in 15 years, and the coupon interest rate is 10%. Compute the after-tax cost of capital to Dayton for bonds.
Most fascinated followers of maslow : Self-Actualization, at the top of his pyramid of needs, is the state that has most fascinated followers of Maslow. What is it?
Compute the before-tax rate of return on assets : Compute the before-tax rate of return on assets at different levels of current assets starting with $10,000 and increasing in $15,000 increments to $100,000
Compute the cost of capital of the stock to the firm : The dividend rate is 12%, and the par value of the stock is $100. Compute the cost of capital of the stock to your firm. Show all work.
Appraisal costs and prevention costs : What are the differences betwee appraisal costs and prevention costs? For each of the following organisations:
What is the current enterprise value of pellagia : Pellagia is a nationwide retail chain specializing in women's apparel. The company has 135 million,What is the current enterprise value of Pellagia?
What are the criticisms or consequences of banning box : What are the criticisms or consequences of banning the box, and should this initiative be continued and expanded? Why or why not?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Complete an amortization table for this installment note

On November 1, 2009, Norwood borrows $700,000 cash from a bank by signing a five-year installment note bearing 7% interest.

  First federal agreed to reduce last years interest

First Federal agreed to reduce last year's interest and the remaining two years' interest payments to $11,555 each and delay all payments until December 31, 2012, the maturity date.

  What would be the yield on three-year treasury bonds today

Assume also that inflation is expected to be 1% in the coming year (year 1), 2% in the next year, what would be the yield on three-year treasury bonds today

  Dispatch delivery service record the interest payment

Josh Reilly is the owner of Dispatch Delivery Service. Recently Josh paid interest of on a personal loan of that he used to begin the business. Should Dispatch Delivery Service record the interest payment? Explain.

  What is the amount of goodwill

On January 1, 2020, Skyline Co. paid $200,000 for a 40% interest in Allen Industries. What is the amount of goodwill? What is Equity Income for 2020

  Find capital changes and consolidated financial statements

Respond to the following in a minimum of 250 words: This week focuses on criteria for calculating capital changes and consolidated financial statements.

  Concept of unit-level activities

How can the concept of unit-level activities be applied to an airline? More specifically, what are two examples of unit-level activities for JetBlue? What steps has JetBlue taken to manage these unit-level activities more efficiently?

  What is your companys monthly cost equation

What is your company's monthly cost equation, operating costs and the current cost driver she has chosen

  Prepare a common size balance sheet

Prepare a common size balance sheet, 2008. Refer to the consolidated balance sheets of the Intel Corporation annual report, 2008

  Prepare an income statement under the variable costing

Prepare an income statement under the variable costing format for year

  What was the beginning pbo

On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. What was the beginning PBO

  Instructions compute the standard cost of the ingredients

tony rondeli manufactures and sells homemade wine and he wants to develop a standard cost per gallon. the following

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd