Do the assigned questions using Malimash, Inc.'s 2014 financial data below: Malimash, Inc. 2014 Financial Data ($ millions) Income Statement Data

Sales Revenue $7,120.00

Depreciation $230.00

Interest Expense $10.00

Pretax Income $2,550.00

Income Taxes $900.00

Net Income $1,650.00

Balance Sheet Data

Current Assets $4,850.00

Fixed Assets, Net $2,400.00

Total Assets $7,250.00

Current Liabilities $3,290.00

Long-Term Debt $100.00

Shareholders' Equity $3,860.00

Total Liabilities and Shareholders' Equity $7,250.00

Required: 1) Calculate return on common equity for 2014 using year-end amounts and assuming no preferred dividends.

2) Disaggregate the ROCE into operating (RNOA) and non-operating components.

3) Comment on Merck's use of leverage. (Assume all assets and current liabilities are operating at a 35% tax rate).

I think I already have answers to 1 and 2 so if you could help me with number 3 and be specific, that would be great. I'm not sure how to use the 35% in the answer.

Currently this is what I have: The company has a debt to equity ratio ($100/$3860) of 0.0259 and a financial leverage of ($7250/$3860) = 1.8782. What this means is that Mercks has a very low leverage on debt.

Not sure how to use the 35% and I haven't gotten a good explanation.