Effect on firm's return on net operating assets
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A firm earns a profit margin of 3.8 percent on sales of $435 million and employs net operating assets of $150 million to do so. It considers adding another product line that will earn a 4.8 percent profit margin with an asset turnover of 2.3.
What would be the effect on the firm's return on net operating assets of adding the new product line?
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Solution Summary
The solution computes the effect on the firm's return on net operating assets of adding the new product line.
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It is assumed that net operating assets remain unchanged after introducing new product line.
Asset Turnover = Sales / Assets
Profit ...
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