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Llana [10]
3 years ago
13

Baker Industries’ net income is $24,000, its interest expense is $5,000, and its tax rate is 25%. Its notes payable equals $24,0

00, long-term debt equals $80,000, 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.
Business
1 answer:
Lostsunrise [7]3 years ago
4 0

Answer:

ROE = 9.23%

ROIC = 7.62%

Explanation:

Data:

Net Income NI = $24,000

Interest Expense IE = $5,000

Tax Rate T = 25% = 0.25

Notes Payable NP = $24,000

Long-term debt LTD = $80,000

Common Equity CE = $260,000

Return On Equity ROE = ?

Retrun On Invested Capital ROIC = ?

Earnings Before Taxes EBT = ?

Invested Capital IC = ?

Earnings Before Taxes and Interest EBIT = ?

Calculations:

ROE = \frac{NI}{CE}= \frac{24,000}{260,000}=0.0923 = 9.23%

EBT = \frac{NI}{1-T} = \frac{24,000}{1-0.25} = \frac{24,000}{0.75} = 32,000

EBIT = EBT+IE=32,000 + 5,000=37,000

IC =NP+LTD+CE=24,000+80,000+260,000=364,000

ROIC = \frac{EBIT*(1-T)}{IC} = \frac{37,000*(1-0.25)}{364,000}= \frac{37,000*(0.75)}{364,000}= \frac{27,750}{364,000}= 0.0762=7.62%

Hope this helps!

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Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $158.82 millio
Dovator [93]

Answer: 170.69

Explanation:

Given that,

Anticipated total cost (Future value) = $158.82 million

                                    = $158,820,000

Saving per month = $590,000

Interest received on savings = 6 percent (compounded monthly)

Future value = $158,820,000

saving\ amount\times\frac{(1+\frac{r}{12} )^{n-1} }{\frac{r}{12}}

590,000\times\frac{(1+\frac{0.06}{12} )^{n-1} }{\frac{0.06}{12}}

\frac{(1.005)^{n-1}}{0.005}=269.1864

Therefore,

n = 170.69 months

Company have to wait before expanding its operations for 170.69 months.

6 0
3 years ago
Another company plans to issue 20-year bonds with a face value of $1,000 and an annual coupon rate of 10%. The market price of s
Lorico [155]

The after-tax cost of debt is 6.28%.  Subtract a company's effective tax rate from one and multiply the difference by its cost of debt to calculate its after-tax cost of debt.

<h3>What is After-tax cost?</h3>
  • After-tax cost denotes the actual costs less an amount equal to the combined federal and state income tax savings relating to the deductibility of said costs for federal and state tax purposes in the year in which such costs are incurred.
  • WACC represents a company's average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt.
  • WACC is the average interest rate that a company anticipates paying to finance its assets. The pre-tax cost of debt must be tax-affected because interest is tax-deductible, effectively creating a "tax shield" that is, interest expense reduces a company's taxable income (earnings before taxes, or EBT).

Therefore,

The after-tax cost of debt is 6.28%.

FV = -$1,000

PMT = -$100

N = 20 years

PV = $1,098 before including flotation costs; $1,098×(1-.05) = $1,043.10 after including flotation costs.

Compute I/Y = 9.511%

After-tax cost of debt = 9.511%×(1-.34) = 6.28%

To learn more about After-tax cost, refer to:

brainly.com/question/25790997

#SPJ4

6 0
2 years ago
Jennifer's Bakery Shop produces baked goods in a perfectly competitive market. If Jennifer decides to produce her 100th batch of
Blizzard [7]

Answer:

To maximize her profit, Jennifer should abandon the product.

Explanation:

To maximize the profit Jennifer should keep marginal benefit as higher as she can, this could happen keeping marginal revenue higher and marginal cost lower as much as she can.

In this case marginal cost is higher than the marginal revenue, which is resulting as a marginal loss. Each extra batch being sold will add a loss of $10 ($110-$120).

Jennifer should abandon the product because it will reduce the average marginal benefit or total profit gradually.

4 0
4 years ago
Read 2 more answers
An approach to the SDLC that plans the project in advance and then progresses according to the plan is called what
makvit [3.9K]

Answer:

source-

One of the most common predictive models is the waterfall model. It assumes various phases in the SDLC that can occur sequentially, which implies that one phase leads into the next phase. In simple words, in waterfall model, all the phases take place one at a time and do not overlap one another.

in your own words-  

One of the foremost common prognostic models is that the falls model. It assumes varied phases within the SDLC which will occur consecutive, which suggests that one section leads into following section. In straightforward words, in falls model, all the phases occur one at a time and don't overlap each other.

Explanation:

source is where i got the imformation and the in your own words is it fully rewritten, sorry its a bit lengthy and hope this helps have a god day/night/noon! :)

7 0
2 years ago
In her spare time, Sharon is the chair for a local nonprofit organization. The project committee is attempting to determine what
maxonik [38]

Answer: (D) Competing

Explanation:

 According to the given question, Sharon is one of the chair-person of a local non-profit organization and usually in her free time she selected the various types of ideas, thoughts and then forced her ideas on the other organizational members.

So, on the basis of the given concept she is using the competing approach to conflict as this type of approach is typically used for making quick decisions for the purpose of resolving various types of problems or issue is an organization. This is also known as the conflicting management style.  

Therefore, Option (D) is correct answer.

3 0
3 years ago
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