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Compute the return on sales

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Question - The Global Products Corporation has three subsidiaries.

Medical Supplies Heavy Machinery Electronics

Sales $20,850,000 $5,120,000 $4,850,000

Net income (after taxes) 1,350,000 473,000 346,000

Assets 8,660,000 8,770,000 3,440,000

Required -

a-1. Compute the return on sales.

a-2. Which division has the lowest return on sales?

Medical Supplies

Electronics

Heavy Machinery

b-1. Compute the return on assets?

b-2. Which division has the highest return on assets?

Medical Supplies

Heavy Machinery

Electronics

c. Compute the return on assets for the entire corporation.

d. If the $8,770,000 investment in the heavy machinery division is sold and redeployed in the medical supplies subsidiary at the same rate of ROA currently achieved in the medical supplies division, what will be the new ROA for the entire corporation?

Reference no: EM132645374

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