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Calculating ROE Using DuPont Method

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Using the annual report information available on each of the company's websites: compute the ROE for Yahoo and Google.

Please use the DuPont Method =(Net Profit Margin) x (Asset Turnover) x (Equity Multiplier) for Year End 2010 for each company.

Please show calculations.

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Solution Preview

We note that

ROE = (Profit margin)*(Asset turnover)*(Equity multiplier) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

For Yahoo (figures in thousands)

Net profit = 1,231,663

Sales (aka Revenue) = ...

Solution Summary

Calculating ROE Using DuPont Method