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Last year, K9 WebbWear, Inc., reported an ROE of 20 percent. The firm’s debt ratio was 55 percent, sales were $16 million, and the capital intensity was 1.25 times. This year, K9 WebbWear plans to increase its debt ratio to 60 percent. The change will not affect sales or total assets, however, it will reduce the firm’s profit margin to 11 percent.

  

Calculate the net income and profit margin for K9 WebbWear last year. (Enter your answer in millions of dollars rounded to 2 decimal places. Round your percentage answer to 2 decimal places.)

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  Net income (Last year) $  million
  Profit margin (Last year) %

By how much will the change in K9 WebbWear’s debt ratio affect its ROE?

  Change in ROE (This year)
(Click to select)
increase
decrease
   %

Last year, K9 WebbWear, Inc., reported an ROE of 20 percent. The firm’s debt ratio was 55 percent, sales were $16 million, and the capital intensity was 1.25 times. This year, K9 WebbWear plans to increase its debt ratio to 60 percent. The change will not affect sales or total assets, however, it will reduce the firm’s profit margin to 11 percent. Calculate the net income and profit margin for K9 WebbWear last year. (Enter your answer in millions of dollars rounded to 2 decimal places. Round your percentage answer to 2 decimal places.) Net income (Last year) $ million Profit margin (Last year) % By how much will the change in K9 WebbWear’s debt ratio affect its ROE? Change in ROE (This year) %