The following information is from the 2017 annual report of Weber Corporation, a company that supplies manufactured parts to the household appliance industry.
Average total assets................................$24,500,000
Average interest-bearing debt.....................10,000,000
Average other liabilities..............................2,250,000
Average shareholders' equity......................12,250,000
Sales...................................................49,000,000
Interest expense.........................................800,000
Net income............................................2,450,000
Required:
1. Compute Weber Corporation's return on assets (ROA) for 2017 using a combined federal and state income tax rate of 40% where needed.
2. Compute the profit margin and asset turnover components of ROA for 2017.
3. Weber's management believes that various business initiatives will produce an asset turnover rate of 2.25 next year. If the profit margin next year is unchanged from 2017, what will be the company's ROA?