2-40. See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.

p. Was
Mydeco able to improve its ROIC in 2013 relative to what it was in 2009?

61.4 ´ (1- 0.35)

72.8 ´ (1- 0.35)

Mydeco was able to improve its ROIC in 2009 relative to 2013.

2-41. For fiscal year 2011, Peet’s Coffee and Tea (PEET) had a net profit margin of 4.78%, asset
turnover of 1.73, and a book equity multiplier of 1.21.

a. Use this data to compute Peet's ROE using the DuPont Identity.

b. If Peet's managers wanted to increase its ROE by one percentage point, how much higher
would their asset turnover need to be?

c. If Peet's net profit margin fell by one percentage point, by how much would their asset
turnover need to increase to maintain their ROE?

a. Peet’s ROE (DuPont) = 4.78% × 1.73 × 1.21 = 10.00%.

11.00%
b. Peet's new asset turnover = =1.90 or an increase of 1.90 – 1.73 = 0.17.
4.78% ´ 1.21

10.00%
c. Peet's new asset turnover = =2.19 or an increase of 2.19 – 1.73 = 0.36.
3.78% ´ 1.21

2-42. For fiscal year 2011, Starbucks Corporation (SBUX) had total revenues of $11.70 billion, net
income of $1.25 billion, total assets of $7.36 billion, and total shareholder’s equity of $4.38
billion.

a. Calculate Starbucks’ ROE directly, and using the DuPont Identity.

b. Comparing with the data for Peet’s in problem 41, use the DuPont Identity to understand
the difference between the two firms’ ROEs.

1.25
a. Starbucks’ ROE = =28.54% .
4.38

1.25
Starbucks’ net profit margin = =10.68% .
11.70

11.70
Starbucks’ asset turnover = =1.59 .
7.36
2-40. See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.
Was Mydeco able to improve its ROIC in 2013 relative to what it was in 2009?
61.4 ´ (1- 0.35)
= =5.67%
2009 ROIC 252.7 +500 - 48.8 .
 72.8 ´ (1- 0.35)
= =6.00%
2013 ROIC 273.7 +600 - 85 .
Mydeco was able to improve its ROIC in 2009 relative to 2013.
2-41. For fiscal year 2011, Peet’s Coffee and Tea (PEET) had a net profit margin of 4.78%,
asset turnover of 1.73, and a book equity multiplier of 1.21.
a. Use this data to compute Peet's ROE using the DuPont Identity.
b. If Peet's managers wanted to increase its ROE by one percentage point, how much
higher would their asset turnover need to be?
c. If Peet's net profit margin fell by one percentage point, by how much would their asset
turnover need to increase to maintain their ROE?
a. Peet’s ROE (DuPont) = 4.78% × 1.73 × 1.21 = 10.00%.
11.00%
= =1.90
b. Peet's new asset turnover 4.78% ´ 1.21 or an increase of 1.90 – 1.73 = 0.17.
10.00%
= =2.19
c. Peet's new asset turnover 3.78% ´ 1.21 or an increase of 2.19 – 1.73 = 0.36.
2-42. For fiscal year 2011, Starbucks Corporation (SBUX) had total revenues of $11.70 billion,
net income of $1.25 billion, total assets of $7.36 billion, and total shareholder’s equity of $4.38
billion.
a. Calculate Starbucks’ ROE directly, and using the DuPont Identity.
b. Comparing with the data for Peet’s in problem 41, use the DuPont Identity to
understand the difference between the two firms’ ROEs.
1.25
= =28.54%
a. Starbucks’ ROE 4.38 .
1.25
= =10.68%
Starbucks’ net profit margin 11.70 .
11.70
= =1.59
Starbucks’ asset turnover 7.36 .
7.36
= =1.68
Starbucks’ equity multiplier 4.38 .
Starbucks’s ROE (DuPont) = 10.68% × 1.59 × 1.68 = 28.53% (difference due to rounding).
b. Starbucks has a superior profit margin and a greater equity multiplier (which could represent
higher leverage). However, it has a lower asset turnover. Its greater ROE is driven by its profit margin
and its leverage.
2-43. Consider a retailing firm with a net profit margin of 3.5%, a total asset turnover of 1.8,
total assets of $44 million, and a book value of equity of $18 million.
a. What is the firm’s current ROE?
b. If the firm increased its net profit margin to 4%, what would be its ROE?
c. If, in addition, the firm increased its revenues by 20% (while maintaining this higher
profit margin and without changing its assets or liabilities), what would be its ROE?
a. 3.5 × 1.8 × 44/18 = 15.4%.
b. 4 × 1.8 × 44/18 = 17.6%.
c. 4 × (1.8*1.2) × 44/18 = 21.1%.