.20 Calculating and Interpreting the Return on Common Share- holders' Equity and Its Components. JCPenney operates a chain of retail department stores, selling apparel, shoes, jewelry, and home furnishings It also offers most of its products through catalog distribution. During fiscal Year 5, it sold Eckerd Drugs, a chain of retail drugstores, and used the cash proceeds, in part, to repurchase shares of its common stock Exhibit 4.27 presents selected data for JCPenney for fiscal Year 3, Year 4, and Year 5. LO 4-1, LO 42 LO 43, LO 44 REQUIRED a. Calculate the rate of ROA for fiscal Year 3, Year 4, and Year 5. Disaggregate ROA into the profit margin for ROA and total assets turnover components. The income tax rate is 35%. b. Calculate the rate of ROCE for fiscal Year 3, Year 4, and Year 5. Disaggregate ROCE into the profit margin for ROCE, assets turnover, and capital structure leverage components . Suggest reasons for the changes in ROCE over the three years d. Compute the ratio of ROCE to ROA for each year e. Calculate the amount of net income available to common stockholders derived from the use of financial leverage with respect to creditors' capital the amount derived from the use of preferred shareholders' capital, and the amount derived from common sharehold- ers capital for each year Did finandal leverage work to the advantage of the common shareholders in each of the three years? Explain. f. Exhibit 4.27 Selected Data for JCPenney (amounts in millions) (Problem 4.20) Year Ended January 31, Year 4 $17,786 (928) 25 Year 5 Year 3 Sales Net income loss) Interest expense Preferred stock dividend Income tax rate $18,424 524 279 12 $17,633 405 245 27 271 35% 35% 35% Year 5 14,127 4,856 Year 3 $17.787 6,037 January 31 Year 4 Year 2 Total assets Preferred stock Total common shareholders' equity $18,300 304 5,121 $18,048 363 5,766 .20 Calculating and Interpreting the Return on Common Share- holders' Equity and Its Components. JCPenney operates a chain of retail department stores, selling apparel, shoes, jewelry, and home furnishings It also offers most of its products through catalog distribution. During fiscal Year 5, it sold Eckerd Drugs, a chain of retail drugstores, and used the cash proceeds, in part, to repurchase shares of its common stock Exhibit 4.27 presents selected data for JCPenney for fiscal Year 3, Year 4, and Year 5. LO 4-1, LO 42 LO 43, LO 44 REQUIRED a. Calculate the rate of ROA for fiscal Year 3, Year 4, and Year 5. Disaggregate ROA into the profit margin for ROA and total assets turnover components. The income tax rate is 35%. b. Calculate the rate of ROCE for fiscal Year 3, Year 4, and Year 5. Disaggregate ROCE into the profit margin for ROCE, assets turnover, and capital structure leverage components . Suggest reasons for the changes in ROCE over the three years d. Compute the ratio of ROCE to ROA for each year e. Calculate the amount of net income available to common stockholders derived from the use of financial leverage with respect to creditors' capital the amount derived from the use of preferred shareholders' capital, and the amount derived from common sharehold- ers capital for each year Did finandal leverage work to the advantage of the common shareholders in each of the three years? Explain. f. Exhibit 4.27 Selected Data for JCPenney (amounts in millions) (Problem 4.20) Year Ended January 31, Year 4 $17,786 (928) 25 Year 5 Year 3 Sales Net income loss) Interest expense Preferred stock dividend Income tax rate $18,424 524 279 12 $17,633 405 245 27 271 35% 35% 35% Year 5 14,127 4,856 Year 3 $17.787 6,037 January 31 Year 4 Year 2 Total assets Preferred stock Total common shareholders' equity $18,300 304 5,121 $18,048 363 5,766