disaggregate merck s roce into operating rnoa and non operating components 536483

Balance Sheet Data

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Current assets

$4,850

Fixed assets, net

2,400

Total assets

7,250

Current liabilities

3,290

Long-term debt

100

Shareholders” equity

3,860

Total liabilities & shareholders” equity

7,250

Required:

a. Calculate return on common equity for Year 9 using year-end amounts and assuming no preferred dividends.

b. Disaggregate Merck”s ROCE into operating (RNOA) and non-operating components. Comment on Merck”s use of leverage. (Assume all assets and current liabilities are operating and a 35% tax rate.)

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