A firm has a debt/equity ratio of 50 percent. Currently. It has interest expense of $5o0.000 on $5.000.000 of total debt outstanding its tax rate is 40 percent, if the firm's ROA is 6percent, by how many percentage points is the firm's ROE greater than its ROAO 5.2%O 7.4%O 3.0%O 0.0n

Return on Assets = Net Income/Total Assets Return on Equity = Net Income/Equity

A firm has a debt/equity ratio of 50 percent. Currently. it has interest expense of 5500.000 on $S.000.000 of total percent, by how many percentage points is the firm's ROE greater than its ROA outitanding O 5.2% O 7 AM O 3.0% O 0.om

A firm has a debt/equity ratio of 50 percent. Currently. it has interest expense of 5500.000 on $S.000.000 of total percent, by how many percentage points is the firm's ROE greater than its ROA outitanding O 5.2% O 7 AM O 3.0% O 0.om

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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A firm has a debt/equity ratio of 50 percent. Currently. It has interest expense of $5o0.000 on $5.000.000 of total debt outstanding its tax rate is 40 percent, if the firm's ROA is 6
percent, by how many percentage points is the firm's ROE greater than its ROA
O 5.2%
O 7.4%
O 3.0%
O 0.0n

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