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    Jerry Rice and Grain Store Exercise

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    Jerry Rice and Grain Store Exercise

    Jerry Rice and Grain Stores has $4,000,000 in yearly sales. The firm earns 3.5 percent on each dollar of sales
    and turns over its assets 2.5 times per year. It has $100,000 in current liabilities and $300,000 in long-term
    liabilities.

    a). What is its return on stockholders' equity?
    b). If the asset base remains the same as computed in part a, but total asset turnover goes up to 3,
    what will be the new return on stockholders' equity? Assume that the profit margin stays the
    same as do current and long-term liabilities.

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    Solution Preview

    Jerry Rice and Grain Store Exercise

    Jerry Rice and Grain Stores has $4,000,000 in yearly sales. The firm earns 3.5 percent on each dollar of sales
    and turns over its assets 2.5 times per year. It has $100,000 in current liabilities and $300,000 in long-term
    liabilities.

    a). What is its return on stockholders' equity?
    b). If the asset base remains the same as computed in part a, but total asset ...

    Solution Summary

    The solution includes an attachment that contains illustrations and calculations for completion of the Jerry Rice and Grain Store Exercise, determining the return on equity for the Grain Store.

    $2.19