In an effort to analyze Clockwork Company finances, Jim realized ...

[arivle123]

In an effort to analyze Clockwork Company finances, Jim realized that he was missing the company's net profits after taxes for the current year. Find the company's net profits after taxes using the following information.
 
  Return on total assets = 2
  Total asset turnover = 0.5
  Cost of goods sold = 105,000
  Gross profit margin = 0.30

Question 2

The firm's after-tax cost of debt is ________. (See Table 9.1 )
 
  A) 3.25 percent
  B) 4.67 percent
  C) 8 percent
  D) 8.13 percent

[cegalasso]

Answer to Question 1

Sales = Cost of goods sold/(1 - Gross profit margin) = 105,000/(1 - 0.30 ) = 150,000
Total assets = Sales/(Total asset turnover)
= 150,000/0.50 = 300,000
Net profits after taxes = (ROA)  (Total assets)
= (0.02 )  (300,000 ) = 6,000

Answer to Question 2

B