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Young Enterprises Has $2 Million In Assets, $400,000 Of EBIT, And Has A 40% Tax Rate. The Firm Also Has A Debt-to-assets Ratio Of 50% And Pays 12% Interest On Its Debt. What Is Young's ROE?

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Denis Jahnke Profile
Denis Jahnke answered
16.80
 
Net Income= 400000 - (1mn x 0.12) x (1- toll rate)
= (400000 - 120000 ) 0.60= 168000
ROE = 168000/1000000=0.168 or 16.8%
Note: Debt/assets = 50% so equity is the rest that is 50%. So if assets is 2 mn and liability 1mn which is debt, equity is 2 - 1= 1 mn.
 
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Anonymous answered
8. Howard Contracting recently completed a 3-for-1 stock split.  Prior to the split, its stock price was $150 per share.  The firm's total market value was unchanged by the split.  What was the price of the company’s stock following the stock split? (Points: 4)
  $ 50.00
  $ 60.00
  $ 90.00
  $120.00
  $150.00

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