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alukav5142 [94]
2 years ago
7

Pacific Packaging's ROE last year was only 6%; but its management has developed a new operating plan that calls for a debt-to-ca

pital ratio of 40%, which will result in annual interest charges of $168,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $356,000 on sales of $4,000,000, and it expects to have a total assets turnover ratio of 2.7. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places._________%
Business
1 answer:
Firdavs [7]2 years ago
5 0

Answer:

13.75%

Explanation:

Calculation for what will be the company's return on equity

First step

Asset Turnover Ratio= Net Sales / Total Assets ------(1)

Given Asset Turnover Ratio =2.7

=> 2.7 = 4,000,000/ Total Assets (from equation 1)

=>Total Assets = 1,481,481 ------(2)

Second step

ROE = Net Income / Equity

Net Income = (EBIT - Interest Charges) *(1-tax rate)

Net Income = (356,000 -168,000) *(1-35%)

Net Income = $122,200 --------(3)

Equity = Total Assets *(1-debt ratio)

Equity = 1,481,481*(1-0.4) = $888,889 --------(4)

From equation 3 and 4

ROE = Net Income / Equity

ROE= 122,200/888,889

ROE =0.1375*100

ROE=13.75%

Therefore ROE will be 13.75%

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D) were highly likely to be in their lower-achieving group.

Explanation:

Theory X refers to a motivation theory developed by Douglas McGregor. Theory X can be described as a pessimistic view of humanity and human workers. Managers who support theory X tend to dislike their own work and believe everyone else dislikes their work, are not ambitious and believe everyone else is not ambitious either, and finally don't like to assume responsibility over their actions and believe everyone else is like them.

So it shouldn't be a surprise that managers who support theory X are underachievers.

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3 years ago
Why is accounting hard?
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6 0
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Variable costs are
Semmy [17]

Answer:

the costs that change depending on a company's performance

Explanation:

Variable costs refer to the costs that fluctuate with the level of production. An increase or decrease in the output level results in variable costs moving in the same direction. If the business stops production, the variable costs will be nil.

Raw materials and packaging costs are good examples of variable costs. The more a company produces, the more materials it consumes, and the higher the costs of purchasing the materials.

6 0
3 years ago
Why don't many developing countries benefit from the spread of free trade?
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3 years ago
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A company sells 800 units at $16 each, has variable costs of $12 per unit, and fixed costs of $1,200. Income is $
Inessa05 [86]

Assuming a company sells 800 units at $16 each, has variable costs of $12 per unit. The after-tax income is $1,200.

<h3>After-tax income</h3>

Using this formula

After-tax income=(Selling units×Selling price)-[(Variable costs×Selling price)+Fixed costs]×(1- tax rate)

Let plug in the formula

After-tax income=(800 units× $16 each)-[(800 units × $12 each)+$1200]×(1-.40)

After-tax income=$12,800-($9,600+$1,200)×0.60

After-tax income=$12,800-$10,800×0.60

After-tax income=$2,000×0.60

After-tax income=$1,200

Inconclusion the after-tax income is $1,200.

Learn more about after-tax income here:brainly.com/question/1775528

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2 years ago
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