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
evablogger [386]
2 years ago
10

Two companies, A and B, both have $1 million in assets, earnings before interest and taxes (EBIT) of $160,000, and the same tax

rate. Company A is all equity financed, and Company B is 50% debt financed and 50% equity financed. If Company B's pretax cost of debt is 8%, then Company A will have a ROA that is _____ and a ROE that is _____ than Company B's. a. Option D b. Option C c. Option B d. Option A
Business
1 answer:
Paladinen [302]2 years ago
5 0

Answer: higher; lower

Explanation:

EBIT for A = 160,000

Equity of A = 1,000,000

ROA of A = 160,000/1,000,000 = 0.16 = 16%

ROE of A = 160,000/1,000,000 = 0.16 = 16%

EBIT for B = 160000 - (1000000 × 50% × 8%) = 120000

Equity of B = 1000000 × 50% = 500,000

ROA of B = 120000/1000000 = 0.12 = 12%

ROE of B = 120000/500000 = 0.24 = 24%

From the above, we can see that Company A has a higher ROA but had a lesser ROE THAN B

You might be interested in
Using the 4 Cs, we consider a variety of costs associated with the purchase of a product. Cost in the Four Cs model is similar t
Dimas [21]

Answer:

marketing

Explanation:

Marketing may be defined as the business or the action of promoting as well as selling products or the services, which includes a market research and the advertising. It is the activity, the organization undertakes to foster promote by buying or by selling a product or a service in the market.

The 4Cs that is used in the concept of marketing is Convenience, Communication, Consumer solution, Cost. They are quite similar to the 4P model of marketing i.e. Place, Promotion, Product, Price. These models are used in marketing to enhance the 'marketing mix'.

4 0
3 years ago
Read 2 more answers
Heidi, a vsc-certified volunteer, is working at the intake station. as part of her duties, she is required to explain to the tax
umka21 [38]
<span>Heidi should inform them that form 13614-C has to be completed before the return can be prepared, the client will then be interviewed by whomever is preparing the return and additional questions would likely be asked, and the client would need to have a quality review done on their taxes by someone other than the person preparing the return.</span>
5 0
3 years ago
Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk ave
enyata [817]

Answer:

a) 16%

b) 2.25

c) Increase in expected market risk premium

Explanation:

Expected standard deviation of market return = 20%

measure of risk aversion ( A ) = 4

a) Determine a reasonable  expected market risk premium

= A * ( std ) ^2

= 4 * ( 20%)^2

=  16%

b) determine Value of A

market risk premium = A * ( std )^2

∴ A = 9% / ( 20% ) ^2

      = 0.09 / 0.04

      = 2.25

c) If investors become more risk tolerant the expected market risk premium will increase

7 0
2 years ago
What will be the effect on short-run price, quantity, and profit if a technological development reduces marginal costs in a comp
Studentka2010 [4]

Answer:

Price

The price in the short-run will decrease because with less marginal costs, producers would produce more goods and services which would shift the supply curve to the right. The new intersection with the demand curve will be at a lower price.

Quantity

As said above, producers would produce more goods and services which means that the quantity supplied will increase.

Profit

This is a competitive market. Each firm will earn zero profits because the drop in price will match the drop in marginal costs to ensure that firms are not making anything extra.

5 0
3 years ago
During times of rising prices, which of the following is not an accurate statement?a. Average costing will yield results that ar
Levart [38]

Answer:d. LIFO will result in higher income taxes than FIFO

Explanation:

A period of rising prices means price will be higher on the latter goods than the former, inventory sold on Last in first out method (LIFO) will be costlier in this period than inventory sold on First in First out ( FIFO) this invariably means LIFO will result in lower net income due to high cost of inventory compared to FIFO and the lower the net income the lower the income tax this invariably means LIFO will result in lower income tax.

Average costing will yield result that are between those of LIFO and FIFO since it can an average of two price with one LIFO and the other on FIFO, LIFO will result in higher cost of goods sold since the latter goods will be costlier, FIFO will result in higher net income since the goods will be cheaper than LIFO.

5 0
3 years ago
Other questions:
  • Which of the following best describe the interrelated components of internal control? Risk assessment process, backup facilities
    10·1 answer
  • Use the following information to determine this company's cash flows from financing activities.
    11·1 answer
  • Stanley purchases nonresidential real property costing $300,000 and places it in service in March 2018. What is Stanley's 2019 d
    7·1 answer
  • Michael is the project manager in a Manufacturing Company he wants his organization to use technology for higher revenue and pro
    8·2 answers
  • Innovative Consulting has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts
    13·1 answer
  • Under one type of rating law, insurers are free to change rates and to use modified rates immediately. However, the new rate mus
    14·1 answer
  • While any given advertisement for a product may focus on only one or a few purchasing motives, the _____. advertising campaign s
    8·2 answers
  • Global Corporation had 58,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors
    7·1 answer
  • What is the value of (123)°?​
    6·1 answer
  • When is the only time to abbreviate on a job application? Question 3 options: In the Personal Information section In the Positio
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!