5% MIN DTAP a search this course R Ch 04: End-of-Chapter Problems-Analysis of Fi

Question

5% MIN DTAP a search this course R Ch 04: End-of-Chapter Problems-Analysis of Financial Statements Attempts Bekar industries' net i com is S26 000 ts interest expense is oo, and its tax rate is 4S% ts notes payable equals s23,000 long term debt equals $75,000, and common equity equals $260,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? Do not round intermediate calculations. Round your answers to two decimal places ROE ROIC O Type here to search

Explanation / Answer

ROE = net income / total equity

= $26000 / 260000

= 10%

ROIC = EBIT (1 - tax) / [Total liabilities + common stock]

=51272.73 * (1-0.45) / [23000 + 75000 + 260000]

= 28200 / 358000

=7.88%

Note:-   Calculation for EBIT :

EBIT = 51272.73

less: interest = 4000   

EBT = 47272.73

less: tax [26000 /0.55 *0.45] = 21272.73

Net income = 26000

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

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