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djverab [1.8K]
2 years ago
15

Firms U and L each have the same amount of assets, investor-supplied capital, and both have a return on investors' capital (ROIC

) of 12%. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L's debt has an after-tax cost of 8%. Both firms have positive net income and a 35% tax rate. Which of the following statements is CORRECT? a. Firm L has a lower ROE than Firm U. b. The two companies have the same times interest earned (TIE) ratio. c. Firm L has a lower ROA than Firm U. d. Firm L has the higher times interest earned (TIE) ratio. e. Firm L has a higher EBIT than Firm U.
Business
1 answer:
Tanya [424]2 years ago
4 0

Answer:

The correct option is a.

Explanation:

In the question, it is given that there are two firms namely U and L who has same same amounts of assets, investor supplied material, and Return on investor capital.

The Firm U is unleveraged which has 100% equity

whereas,  Firm L is leveraged firm which has 50% debt and 50% equity

As we have to compare these two firms based on return on equity.

So, based on ROE, Firm U has 100% equity so it have more equity

And, the Firm L have 50% equity which means the firm has low equity as 50% contribution is gone to the debt.

The rest information which is given in the question is irrelevant. So, it is ignored.

Thus, the Firm L has a lower ROE than Firm U

Hence, the correct option is a.

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Hello,

Here is your answer:

I think the proper answer to this question will be option A "select a site". That's just because when planing a convention you have to find a place to hold it, form the committee, write the program, and then you have to write invites.

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2 years ago
Mayan company had net income of $33,480. the weighted-average common shares outstanding were 9,300. the company has no preferred
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Answer:

Earnings Per Share = $3.6

Explanation:

Given

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Required

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Earning per share is calculated as thus;

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Earnings Per Share = \frac{N - P}{W}

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Answer:

the bond's current yield.

Explanation:

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The answer is: limiting the types of goods and services produced

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Answer:

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