Jerry Rice Stores has $4,000,000 in yearly sales. THe firm earns 3.5% on each dollar of sales and turns over its assets 2.5 times per year. It has $100,000 in current liabilities and $300,000 in long-term liabilities.
a) What is the return on stockholder's equity?
b) If the asset base remains the same as computed in part a, but total asset turnover goes up to 3, what will be the new return on stockholders equity? Assume profit margin stays the same.