Beaver Company's records have recently been destroyed by fire. The following information was able to be saved from the fire. [table]
Return on Equity | 17.00% Debt to Assets | 35.00% Profit Margin | 8.00% Total Assets | $ 700.00
[/table] Beaver's Net Profit for the year was closest to;

Question

BlackTom AI · Accepted Answer

To start, I will extract the given relationships and totals: debt to assets is 35%, total assets are 700, the return on equity (ROE) is 17%, and the profit margin is 8%.

First, compute debt from the debt-to-assets ratio: Debt = 0.35 × 700 = 245. Then derive equity from the asset side: Equity = Total Assets − Debt = 700 − 245 = 455.

Next, apply the ROE given: ROE = Net Income ÷ Equity. With ROE = 17% (0.17) and Equity = 455, Net Income = 0.17 × 455 = 77.35.

Now compare the calculated Net Income to the provided answer choices: a. 216, b. 314, c. 67, d. 269, e. 77. The computed net income of 77.35 is closest to 77.

For additional consistency, consider the profit margin as a cross-check: Profit Margin = Net Income ÷ Sales, so Sales = Net Income ÷ 0.08. If Net Income is approximately 77.35, then Sales ≈ 964.375. This is a reasonable level of sales given the asset base and does not contradict the other figures, reinforcing the plausibility of the Net Income figure around 77.

Evaluating the options individually: 
- Option a (216) is far from 77.35, which would imply a much larger Net Income than ROE with given equity. 
- Option b (314) likewise overshoots the calculated Net Income significantly. 
- Option c (67) is closer than the first two but still notably lower than 77.35, making it less accurate than 77. 
- Option d (269) is far outside the calculated range. 
- Option e (77) aligns most closely with 77.35 and matches the ROE-derived figure best.

Overall, the logical path—calculate Debt from the ratio, derive Equity, apply ROE to find Net Income, and cross-check with the profit margin—points to the Net Income being about 77.35, which corresponds to option e.

Beaver Company's records have recently been destroyed by fire. The following information was able to be saved from the fire. [table] Return on Equity | 17.00% Debt to Assets | 35.00% Profit Margin | 8.00% Total Assets | $ 700.00 [/table] Beaver's Net Profit for the year was closest to;

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