ROE and ROA XYZ firm has EBIT of $38 and assets of $260. The firm\'s debt carrie
ID: 2793581 • Letter: R
Question
ROE and ROA XYZ firm has EBIT of $38 and assets of $260. The firm's debt carries an interest rate of 6% and the firm has $1.20 of debt for every dollar of equity. The firm's tax rate is 34%. What is the firm's ROE?
14.39%
16.76%
15.48%
16.47%
Statement of Cash Flows Given the following cash flow items find cash provided by operations.
$7,700
$9,600
$8,100
$11,800
Leverage and ROE Firm A uses debt and has $550 in equity. Firm B does not use debt and has $1,050 in equity. Both firms pay a 39% tax rate and both firms have EBIT of $52. Firm A has interest expense of $33. There are no other expenses. If EBIT doubles for both firms ROE for Firm A will be_______; ROE for Firm B will be _______.
9.37%; 5.74%
7.87%; 6.04%
7.47%; 5.54%
8.57%; 6.84%
Net income $ 9,100 (mill) Gross investment in tangible assets $ 1,700 Dividends $ 1,500 Depreciation $ 2,000 Increase in receivables $ 3,000 Increase in payables $ 1,500 Additions to long term debt $ 4,100 Reduction in short term debt $ 1,900Explanation / Answer
1)
assets=260
debt/equity=1.20
D=1.20*E
then
1.20*E+E=260
E=260/2.20
=118.18
Then debt=118.18*1.20=141.82
net income=(38-(141.82*6%))*(1-0.34)=19.46
ROE=19.46/118.18
=16.47%
the above is the answer
we do only one question based on Chegg rule.
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