Keller Cosmetics maintains an operating profit margin of 9.00% and a sales-to-assets ratio of 3.90. It has assets of $700,000 and equity of $500,000. Assume that interest payments are $50,000 and the tax rate is 30%. a. What is the return on assets? (Enter your answer as a percent rounded to 2 decimal places.) b. What is the return on equity? (Enter your answer as a percent rounded to 2 decimal places.) Sara Togas sells all its output to Federal Stores. The following table shows selected financial data, in millions, for the two firms: Sales Interest Payment Net Income Assets at Start of Year Federal Stores $117 $21 $27 $67 Sara Togas 37 18 21 28.5 Assume tax rate is 35%. a. Calculate the sales-to-assets ratio, the operating profit margin, and the return on assets for the two firms. (Do not round intermediate calculations. Round the sales-to-assets ratio answers to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.) b. Now assume that the two companies merge. If the Federal continues to sell goods worth $117 million, how will the three ratios change? (Do not round intermediate calculations. Round the sales-to-assets ratio answer to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.)
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Keller Cosmetics maintains an operating profit margin of 9.00% and a sales-to-assets ratio of 3.90. It has assets of $700,000 and equity of $500,000. Assume that interest payments are $50,000 and the tax rate is 30%.
a. What is the
b. What is the
Sara Togas sells all its output to Federal Stores. The following table shows selected financial data, in millions, for the two firms: Sales Interest Payment Net Income Assets at Start of Year Federal Stores $117 $21 $27 $67 Sara Togas 37 18 21 28.5 Assume tax rate is 35%.
a. Calculate the sales-to-assets ratio, the operating profit margin, and the return on assets for the two firms. (Do not round intermediate calculations. Round the sales-to-assets ratio answers to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.)
b. Now assume that the two companies merge. If the Federal continues to sell goods worth $117 million, how will the three ratios change? (Do not round intermediate calculations. Round the sales-to-assets ratio answer to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.)
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