Question

Last year, Stumble-on-Inn, Inc. reported an ROE of 19 percent. The firm's debt ratio was 60 percent, sales were $34 million, and the capital intensity was 1.30 times. Calculate the net income for Stumble-on-Inn last year. (Do not round intermediate calculations. Enter your answer in dollars not in millions.)

Answer 1

Stumble-on-Inn, Inc.'s net income for last year is $3,359,200.

Data and Calculations:

ROE (Return on Equity) = 19%

Debt ratio =60%

Sales = $34 million

Capital intensity = 1.30 times

Assets = $44.2 million ($34 million x 1.30)

The Total Debt = $26,520,000 ($44,200,000 x 60%)

The Equity = $17,680,000 ($44,200,000 - $26,520,000)

The Net income = $3,359,200 ($17,680,000 x 19%)

Thus, Stumble-on-Inn, Inc.'s net income for last year is $3,359,200.

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