Use attached image to answer the following Required:a. Calculate return on common equity for Year 9 using year-end amounts and assuming no preferred dividends.b. Disaggregate Merck’s ROCE into operating (RNOA) and nonoperating components. Comment on Merck’s use of leverage. (Assume all assets and current liabilities are operating and a 35% tax rate.) 494Selected income statement and balance sheet data from Merck & Co.for Year 9 are reproduced below:CHECK(a) ROCE = 42.7%(b) RNOA = 42.0%MERCK & COMPANY, INC.Year 9 Selected Financial Data ($ millions)Income Statement DataSales revenueDepreciationInterest expensePretax incomeIncome taxes.Net incomeFinancial Statement AnalysisBalance Sheet DataCurrent assets.Fixed assets, netTotal assets..Current liabilitiesLong-term debt.. $7,120230102,5509001,650Shareholders' equityTotal liabilities & shareholders' equityMerck & Co.(continued)$4,8502,4007,2503,2901003,8607,250Required:a. Calculate return on common equity for Year 9 using year-end amounts and assuming no preferred dividends.b. Disaggregate Merck's ROCE into operating (RNOA) and nonoperating components. Comment on Merck's use ofleverage. (Assume all assets and current liabilities are operating and a 35% tax rate.)

Given in the question ($ in Millions): Pre-tax Income $2,550 Income Taxes $900 Net…

Calculate return on common equity for Year 9 using year-end amounts and assuming no preferred dividends. b. Disaggregate Merck’s ROCE into operating (RNOA) and nonoperating components. Comment on Merck’s use of leverage. (Assume all assets and current liabilities are operating and a 35% tax rate.)

Calculate return on common equity for Year 9 using year-end amounts and assuming no preferred dividends. b. Disaggregate Merck’s ROCE into operating (RNOA) and nonoperating components. Comment on Merck’s use of leverage. (Assume all assets and current liabilities are operating and a 35% tax rate.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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