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Question 2 (performance evaluation, DuPont method)

Use the following data for Apple and Dell for year 2008 (real data, in \$ million):

 Apple Dell Profit (operating income) \$6,275 \$3,190 Sales revenue \$32,479 \$61,101 Investment (total assets) \$32,460 \$27,031

Required:

a) compute the ROI for each company.

Apple ROI=1 % (if you get say 12.5%, enter 12.5, not 12.5% or 0.125)
Dell ROI=2 %

b) use the DuPont method to decompose ROI into ROI = profit margin * asset turnover.

In other words, compute profit margin and asset turnover for each company:

Apple profit margin=3 , asset turnover=4(Enter both as a fraction of 1, not as percentage. I.e., if the profit margin is 0.045 (4.5%) and asset turnover is 3.42 (342%), enter 0.045 and 3.42)
Dell profit margin=5 , asset turnover=6

If you multiply profit margin * asset turnover, you should get the ROI from part (a)

c) Which company has higher profit margin? Does it make sense, based on what you know about Apple and Dell?