The Global Products Corporation has three subsidiaries. Medical Supplies Heavy M

Question

The Global Products Corporation has three subsidiaries. Medical Supplies Heavy Machinery Electronics Sales $ 20,590,000 $ 5,140,000 $ 4,190,000 Net income (after taxes) 1,830,000 697,000 364,000 Assets 19,900,000 8,450,000 3,860,000

(a-1) Compute the return on sales? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) Return on sales Medical Supplies % Heavy Machinery % Electronics %

(a-2) Which division has the lowest return on sales? Electronics Medical Supplies Heavy Machinery

(b-1) Compute the return on assets? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) Return on assets Medical Supplies % Heavy Machinery % Electronics %

(b-2) Which division has the highest return on assets? Heavy Machinery Electronics Medical Supplies

(c) Compute the return on assets for the entire corporation. (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on assets %

(d) If the $8,450,000 investment in the heavy machinery division is sold off and redeployed in the medical supplies subsidiary at the same rate of return on assets currently achieved in the medical supplies division, what will be the new return on assets for the entire corporation? (Round your return on assets to 2 decimal places, return on redeployed assets to the nearest dollar amount and final answer to 2 decimal places. Omit the "%" sign in your response.) New return on assets %

Explanation / Answer

Here's the complete solution with steps and formulas in tabular form:

Answer to question Medical Supplies Heavy Machinery Electronic Sales Total Sales $             20,590,000 $             5,140,000 $                                                                 4,190,000 $             29,920,000 Net income after tax $               1,830,000 $                697,000 $                                                                     364,000 $               2,891,000 Assets $             19,900,000 $             8,450,000 $                                                                 3,860,000 $             32,210,000 a1) Return on sales = net income after tax/ total sales 8.89% 13.56% 8.69% 9.66% a2) Lowes return on sales This one: Electronic Sales has least ROS b1) Return on assets = net income after tax/ total assets 9.20% 8.25% 9.43% 8.98% b2) This one: Electronic Sales has highest ROA c) Return on assets = net income after tax/ total assets 8.98% New Assets and Returns on assets Medical Supplies Heavy Machinery Electronic Sales Total Assets after redeployment $       28,350,000.00 $                            -   $                                                           3,860,000.00 $       32,210,000.00 Net income after tax after redeployment = ROA* Assets $         2,607,060.30 $                            -   $                                                               364,000.00 $         2,971,060.30 d) Return on assets = net income after tax/ total assets 9.22%

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