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    Kimble's Avatar
    Kimble Posts: 2, Reputation: 1
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    #1

    Dec 27, 2007, 08:44 PM
    net income and return on assets (investment) be for the year
    Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,200,000 in annual sales, with a 6 percent profit margin. What would net income and return on assets (investment) be for the year?

    I can't wrap my mind around this question. Help!!

    $1,200,000 in annual sales with a 6 percent profit margin= Net Income of $72,000
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Dec 29, 2007, 04:18 AM
    Your calculation of a 72,000 net income is correct.

    Return on Assets = Net Income / Total Assets
    ROA = 72,000 / 500,000
    ROA = 14.4%
    Kimble's Avatar
    Kimble Posts: 2, Reputation: 1
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    #3

    Dec 31, 2007, 04:54 PM
    Thank you!
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