1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
skad [1K]
3 years ago
15

Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $10 m

illion in invested capital, has $1.5 million of EBIT, and is in the 25% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 55% and pays 11% interest on its debt, whereas LL has a 30% debt-to-capital ratio and pays only 10% interest on its debt. Neither firm uses preferred stock in its capital structure. Calculate the return on invested capital (ROIC) for each firm.
Business
1 answer:
Bas_tet [7]3 years ago
6 0

Answer:

0.1125 or 11.25% for each firm

Explanation:

Given that,

Each has $10 million in invested capital,

$1.5 million of EBIT

25% federal-plus-state tax bracket

ROIC for LL:

= [EBIT × (1 - tax rate)] ÷ invested capital

= [1.5 × (1 - 25%)] ÷ 10

= 0.1125 or 11.25%

ROIC for HL

= [EBIT × (1 - tax rate)] ÷ invested capital

= [1.5 × (1 - 25%)] ÷ 10

= 0.1125 or 11.25%

Therefore, the return on invested capital (ROIC) for each firm is 11.25%

You might be interested in
SWH Corporation issued bonds on January 1, 2004. The bonds had a coupon rate of 5.5%, with interest paid semiannually. The face
Mashutka [201]
It should be the Second one that fits the best answer
4 0
3 years ago
Lacey Company prepared the tabulation below at December 31, 2022. Net Income $310,000
valentinak56 [21]

Answer:

Net cash provided by operating activities is $325,000.

Explanation:

Lacey Company

Cash Flow Statement (Operating Activities Only)

December 31, 2022.

<u>Details                                                                       Amount ($)</u>

Net Income                                                                   310,000

Depreciation expense                                                  45,000

Increase in accounts receivable                                 (55,000)

Decrease in inventory                                                   12,000

Increase in accounts payable                                        6,000

Increase in prepaid expenses                                      (4,000)

Decrease in income taxes payable                               3,500

Gain on disposal of land                                                <u> 7,500 </u>

Net cash provided (used) by operating activities  <u> 325,000 </u>

5 0
3 years ago
Buzz Lightyear has been offered an investment in which he expects to receive payments of $4,000 at the end of each of the next 1
LenaWriter [7]

Answer:

IRR= 21.86%

Explanation:

Giving the following information:

Initial investment (PV)= $10,000

Cash flows (PMT)= $4,000 per year

Number or years (n)= 4

<u>It is extremely difficult to calculate the IRR using the formula. We will use the financial calculator.</u>

Function: CMPD

n= 4

I%= SOLVE = 21.86%

PV= 10,000

PMT= -4,000

IRR= 21.86%

6 0
3 years ago
Over time, members of the supply chain often formalize their relationship by entering into contracts that dictate various terms,
umka2103 [35]

Answer:

contractual vertical marketing system

Explanation:

In the supply chain management system there is this Contractual Vertical Marketing System under which there is this vertical relationship of marketing in between two positions of the supply chain.

Here also the Walmart is the one which shall supply goods at the last to consumers and that the company P&G shall supply goods to Walmart. This is the chain. Now this is a vertical chain, as from producer to seller to consumer.

And since it is a marketing chain with contractual clauses which include all the penalties also.

8 0
3 years ago
Read 2 more answers
When a government collects more revenue in one year than it spends, there is a budget?
murzikaleks [220]
This is a profit, which increases next year's budget.
4 0
3 years ago
Other questions:
  • A company's total marketing communications mix consists of a special blend of advertising, sales promotion, public relations, pe
    11·1 answer
  • Lists and arrays can be valuable tools for the programmer. 1. provide an example of a ‘list' and explain how it would be used as
    12·1 answer
  • Accumulating capitala. requires that society sacrifice consumption goods in the present.b. allows society to consume more in the
    9·2 answers
  • What is a Financial market
    14·2 answers
  • Sunland Company issued its 9%, 25-year mortgage bonds in the principal amount of $2,990,000 on January 2, 2006, at a discount of
    11·1 answer
  • Benefits of a better education include all of the following except
    13·2 answers
  • A production goal may be set too high by upper management because a. ​they are unsure about the actual costs of production b. ​t
    10·1 answer
  • Limited partnership investors are subject to which of the following risks?I Tax audit riskII Marketability riskIII Legislative r
    8·1 answer
  • The federal government relies mostly on revenue from _____.
    11·2 answers
  • Training is a skill learning process.​
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!