Last Year Reynolds Ltd.reported the Following Results

question 16

Essay

Last year Reynolds Ltd.reported the following results:

Required:
a.Using the DuPont method,calculate the company's return on investment for the year just ended.
b.Assuming the company's sales,operating expenses,and assets remain the same as last year,by how much would the gross margin percentage have to increase to achieve a 20% return on investment?
c.Assume the company sets a minimum required return of 13%,what would the residual income be?

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Definitions:

Cash Bidding Price

The price offered in cash during an auction or bidding process for an asset or item.

Market Price

The market price at which you can currently buy or sell an asset or service.

Interest Tax Savings

The reduction in tax payments resulting from the deduction of interest payments on debt from taxable income.

Discount Rate

In DCF analysis, the rate used to calculate the present worth of future cash flows.