Importance of studying business studies

Duffert Industries has total assets of $1,080,000 and total current liabilities (consisting only of accounts payable and accrual

iris [78.8K]

Answer:

ROIC is 9.26%

ROE is 12.63%

Explanation:

According to the given data we have the following:

Total assets = $1,080,000

Total liabilities = Current liabilities + Debt + Common equity = $1,080,000

D/(D + E) = 0.40

D / ($1,080,000 - 100,000) = 0.40

D = $392,000

Common equity = Total liabilities - Current liabilities - Debt = $1,080,000 - 100,000 - 392,000= $588,000

BEP = 0.15 = EBIT/TA

= EBIT/$1,080,000

Therefore, EBIT = $162,000

In order to calculate the ROIC we would have to make the following calculation:

ROIC = [EBIT(1 – T)]/(D + E) = [$151,200(0.6)]/($392,000 + $588,000) = 9.26%

ROIC is 9.26%

To calculate the ROE we would have to calculate first net income from income statement as follows:

EBIT=$151,200

Less: Interest ($392,000 x 7%) 27,440

EBT= 123,760

Less: Tax 40% 49,504

Net Income= 74,256

Therefore, ROE = NI/E = $74,256/$588,000 = 12.63%

ROE is 12.63%

6 0

3 years ago

Commenced business with cash of Rs 20,000 and Goods worth Rs 25,000

nevsk [136]

Explanation:

$\sf \green{25000 - 20000 = \longrightarrow 5000}$

7 0

2 years ago

If you owned a business what would be the way to protect your personal assets from liablity?

inysia [295]

Answer:

When you form an LLC, you establish a new business entity that's legally separate from its owners. This separation provides what is called limited liability protection. As a general rule, if the LLC can't pay its debts, the LLC's creditors can go after the LLC's bank account and other assets.Sep 4, 2020

7 0

3 years ago

Define the following terms: a. Cost of debt b. Cost of equity c. After-tax WACC d. Equity beta e. Asset beta f. Pure-play compar

gtnhenbr [62]

Answer: The answers are explained below.

Explanation:

• Cost of debt: The cost of debt is the interest rate that a company is charged on its debts. It is the interest paid on bonds, loans etc. The cost of debt is usually the before-tax cost of a debt.

• Cost of equity: The cost of equity is the return a firm pays to its equity investors e.g shareholders in order to reward them for the risk taken by investing their capital. Companies need capital to operate and grow hence, individuals and organizations who provide funds to such companies are rewarded.

• After tax WACC: The Weighted Average Cost of Capital (WACC) is a firm's combined cost of capital including preferred shares, common shares, and debt after the deduction of tax.

• Equity Beta: It measures the sensitivity of the stock price to changes in market. Equity Beta is also called levered beta.

• Asset beta: It is the beta of a firm without the effect of debt. It is a company's volatility of returns without its indebtedness.

• Pure play comparable: The pure play comparable is the taking of the beta estimate of another company that is comparable and in same line of business.

• Certainty equivalent: It is the guaranteed return that an individual would take now, rather than awaiting a higher but uncertain return later in the future.

3 0

3 years ago

Read 2 more answers

Coyne Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $30,000 to

postnew [5]

Answer:

A. $41,120.

Explanation:

Year Description Cash flow Present [email protected]%

0 Equipment cost ($30,000) ($30,000)

1-4 Additional CF $24,000 $69,929.10

4 Residual value $2,000 $1,184.16

Present value total $41,113.26

Based on the above calculation, the answer shall be A. $41,120.

8 0

4 years ago

Importance of studying business studies​

Importance of studying business studies