You are considering investing in Hershey. You have identified the following information from the firm’s financial statements: total assets are $824 million, accounts receivable are $92 million, the average collection period is 62 days, net income is $69.5 million, and debt--to--equity is 0.6 times. Assume all liabilities are in the form of debt.
1. Find the value of equity for Hershey
2. Calculate the ROE for Hershey. In percent.
3. You might also invest in Dove instead of Hershey. The data is Hershey Net Profit Margin: 12.835%, Dove Net Profit Margin: 20.063%, Dove ROE 21.090%. Assuming the net profit margin and total asset turnover are similar for both companies, which company would you prefer to invest in? Briefly justify your answer.