Baker Industries\' net income is $23000, its interest expense is $6000, and its

Question

Baker Industries' net income is $23000, its interest expense is $6000, and its tax rate is 45%. Its notes payable equals $23000, long-term debt equals $70000, and common equity equals $240000. The firm finances with only debt and common equity, so it has no preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below What are the firm's ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations. ROE ROIC 9.58 % 9.16 %

Explanation / Answer

Return on Equity = Net income / Total equity

Net income = 23000

Total equity = 240000

Return on equity (ROE) = 23000/240000 = 9.58%

Return On investment Capital (ROIC) = Netincome / Total capital

Total capital = Notes payable + long term debt + equity

= 23000 + 70000 + 240000 = 333000

ROIC = 23000/333000 = 6.9%

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.