nt: Chapter 4 Homework, part 1- graded Assignment Score: 80.5 Save Submit Assign
ID: 2616057 • Letter: N
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nt: Chapter 4 Homework, part 1- graded Assignment Score: 80.5 Save Submit Assignment for Grading sQucstion 3 of6 Check My Work Click here to read the eBook: Potential Misuses of Roe ROE AND ROIC Baker Industries' net income is $27,000, its interest expense is $5,000, and its tax rate is 40%. Its notes payable equals $23,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? Round your answers to two decimal places. Do not round Intermediate calculations. ROE ROIC 10.8 15.33 *% Hide Feedback Partially Correct Check My Work Om lcon Key Question 3 of 6 Save Submit Assignment for GradingExplanation / Answer
Return on equity (R.O.E.) = Net income/Equity
= 27,000/250,000
= 0.108
= 10.85
Invested capital = Notes payable + Long term debt + Common equity
= 23,000 + 75,000 + 250,000
= $348,000
Net operating profit after tax = Net income + Interest expense
= 25,000 + 5,000
= $30,000
Return on invested capital (R.O.I.C.) = Net operating profit after tax/Invested capital
= 30,000/348,000
= 0.0862
= 8.62%
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