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Precious Metal Mining has $17 million in sales, its ROE is 13%, and its total assets turnover is 4x. Common equity on the firm’s balance sheet is 55% of its total assets. What is its net income? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. Do not round intermediate steps.

Answer :

jepessoa

Answer:

net income = $303,875

Explanation:

total sales $17 million

return on equity (ROE) = 13% = net income / stockholders' equity

asset turnover = 4 = total sales / average total assets

common equity = 55% of assets

first we must determine average total assets:

average total assets = total sales / 4 = $17 million / 4 = $4.25 million

common equity = 55% x total assets = 55% x $4.25 million = $2,337,500

ROE = 13% = net income / $2,337,500

net income = 13% x $2,337,500 = $303,875

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