Doonan Corporation has provided the following financial data from its balance sheet and income statement: The market price of common stock at the end of Year 2 was $4.79 per share. The company's return on total assets for Year 2 is closest to:

Question

Doonan Corporation has provided the following financial data from its balance sheet and income statement:  The market price of common stock at the end of Year 2 was $4.79 per share. The company's return on total assets for Year 2 is closest to:

Quizplus · Accepted Answer

Return on total assets = Adjusted net income* ÷ Average total assets**
= $36,050 ÷ $1,464,500 = 2.46% (rounded)
*Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $26,300 + [$15,000 × (1 - 0.35)] = $36,050
**Average total assets = ($1,489,000 + $1,440,000)÷ 2 = $1,464,500

Doonan Corporation Has Provided the Following Financial Data from Its