Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 887.00 Cost of goods sold 747.00 Depreciation 37.00 Earnings before interest and taxes (EBIT) $ 103.00 Interest expense 18.00 Income before tax $ 85.00 Taxes 17.85 Net income $ 67.15 BALANCE SHEET (Figures in $ millions)   End of Year Start of Year Assets     Current assets $ 375 $ 324 Long-term assets 270 228 Total assets $ 645 $ 552 Liabilities and shareholders’ equity     Current liabilities $ 200 $ 163 Long-term debt 114 127 Shareholders’ equity 331 262 Total liabilities and shareholders’ equity $ 645 $ 552 The company’s cost of capital is 8.5%. Required:   What is the company’s return on capital? (Use start-of-year rather than average capital.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. P.S - Answer is not 17.26%.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT
(Figures in $ millions)
Net sales $ 887.00
Cost of goods sold 747.00
Depreciation 37.00
Earnings before interest and taxes (EBIT) $ 103.00
Interest expense 18.00
Income before tax $ 85.00
Taxes 17.85
Net income $ 67.15
BALANCE SHEET
(Figures in $ millions)
  End of Year Start of Year
Assets    
Current assets $ 375 $ 324
Long-term assets 270 228
Total assets $ 645 $ 552
Liabilities and shareholders’ equity    
Current liabilities $ 200 $ 163
Long-term debt 114 127
Shareholders’ equity 331 262
Total liabilities and shareholders’ equity $ 645 $ 552

The company’s cost of capital is 8.5%.

Required:

 

  1. What is the company’s return on capital? (Use start-of-year rather than average capital.)

    Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

    P.S - Answer is not 17.26%.
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