Answer Happy

Sara Togas sells all its output to Federal Stores. The following table shows selected financial data, in millions, for the two firms: Assets at Start of Year Interest Payment $22 19 Sales $118 38 Federal Stores Sara Togas Net Income $28 22 $68 29.0 Assume tax rate is 35%. a. Calculate the sales-to-assets ratio, the operating profit margin, and the return on assets for the two firms. (Do not round intermediate calculations. Round the sales-to-assets ratio answers to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.) Sara Togas Federal Stores 1.73 1.31 Sales-to-assets ratio Operating profit margin Return on assets % % % % b. Now assume that the two companies merge. If Federal continues to sell goods worth $118 million, how will the three ratios change? (Do not round intermediate calculations. Round the sales-to-assets ratio answer to 2 decimal places. Enter the operating profit margin and return on assets answers as a percent rounded to 2 decimal places.) Merged Firm 1.21 Sales-to-assets ratio Operating profit margin Return on assets % %