Database Systems is considering expansion into a new product line. Assets to support expansion will cost $750,000. It is estimated that Database can generate $2,150,000 in annual sales, with an 7 percent profit margin. What would net income and return on assets (investment) be for the year? (Input your return on assets answer as a percent rounded to 2 decimal places.)

Question

Business

Christina Singh

11 April, 04:56

Database Systems is considering expansion into a new product line. Assets to support expansion will cost $750,000. It is estimated that Database can generate $2,150,000 in annual sales, with an 7 percent profit margin. What would net income and return on assets (investment) be for the year? (Input your return on assets answer as a percent rounded to 2 decimal places.)

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Augustus Whitney · Answer 1

Net income = $ 150500

Return on assets = 20.07 %

Explanation:

Net income = (annual sales) * 7%

= $ 2150000*7%

= $ 150500

return on assets = [net income*100]/[assets to support expansion]

= (150500) (100) / (750000)

= 20.07 %

Therefore, the Net income for the year is $ 150500 and the Return on assets for the year is 20.07 %.