Question

Hamner Time has sales of $122,000, costs of $54,600, depreciation of $32,800, interest of $12,000, and a tax rate of 21 percent. The firm has total assets of $422,900, long-term debt of $146,800, and current liabilities of $65,200. What is the return on equity

Answer 1

Based on the sales, cost, depreciation, and interest, Hamner Time will have a return on equity of 8.47%.

What is Hamner Time's return on equity?

This can be found as:

= Net income / Equity

Net income is:
= ( Sales - Cost - Depreciation - Interest) x (1 - tax rate)

= (122,000 - 54,600 - 32,800 - 12,000) x (1 - 21%)

= $17,854

The Equity is:

= Assets - Long term debt - Current liabilities

= 422,900 - 146,800 - 65,200

= $210,900

Return on Equity is:

= 17,854 / 210,900

= 8.47%

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