Answer: 12.53%
Explanation:
EBIT = $780,000
Interest = $470,000
EBT = EBIT - Interest
= $780,000 - $470,000
= $310,000
Net Income = EBT - Tax
= $310,000 - (35% × $310,000)
= $310,000 - (0.35 × $310,000)
= $310,000 - $108,500
= $201,500
Total assets turnover ratio = 2.8
Total assets = $10,000,000/2.8
= 3,571,429
Debt ratio = 55% = 0.55
Debt/Total asset = 0.55
Debt/3,571,429 = 0.55
Debt = 0.55 × 3571429
= 1,964,286.4
Equity = 0.45 × 3571429
= $1607143.5
Return on equity = Net income/Equity
= $201,500/$1,607,143.5
= 0.1253
= 12.53%
The company's return on equity will be 12.53%.
OPTIONS:
A. The results of personal preferences and intertemporal budget constraints.
B. Are the negative results of change in wage levels and a higher work effort.
C. Are being off set by negative savings or less savings in other types of accounts.
D. Are the results of higher interest rate and preferences about present consumption.
Answer:C. Are being off set by negative savings or less savings in other types of accounts.
Explanation:IRAs(INDIVIDUAL RETIREMENT ACCOUNTS) are special accounts aimed at ensuring that Employees of Government agencies, corporations and other private organisations save money in accounts with special tax benefits in order to ensure a better and happy retirement.
THE CONTINUOUS INCREASE IN THE INDIVIDUAL SAVINGS ACCOUNTS CAN BE ATTRIBUTED TO IT BEING OFF SET BY THE NEGATIVE OR LESS SAVINGS FROM OTHER TYPES OF SAVINGS ACCOUNTS.
