4. (Question 4 is composed of two parts.) The DuPont formula defines the net return onshareholders' equity as a function of the following components:•Operating marginAsset turnoverInterest burdenFinancial leverageIncome tax rateUsing only the data in the table shown below:a. Calculate each of the five components listed above for 2010 and 2014, and calculate thereturn on equity (ROE) for 2010 and 2014, using all of the five components. Showcalculations.b. Briefly discuss the impact of the changes in asset turnover and financial leverage on thechange in ROE from 2010 to 2014.Income Statement DataRevenuesOperating incomeDepreciation and amortizationInterest expensePretax incomeIncome taxesNet income after taxBalance Sheet DataFixed assetsTotal assetsWorking capitalTotal debtTotal shareholders' equity2010$54238333213192010$41245123161592014$97976906737302014$702911570220

DuPont formula for ROE is shown below.

Answered: 4. (Question 4 is composed of two…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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