A firm needs $200,000 to start and expects Sales $300,000 Expenses $285,000 Tax rate 40% a. What are earnings if the owners invest the $200,000? b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings? c. What is the return on the owners' investment in each case? Why do the returns differ?
A firm needs $200,000 to start and expects Sales $300,000 Expenses $285,000 Tax rate 40% a. What are earnings if the owners invest the $200,000? b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings? c. What is the return on the owners' investment in each case? Why do the returns differ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm needs $200,000 to start and expects
Sales $300,000
Expenses $285,000
Tax rate 40%
a. What are earnings if the owners invest the $200,000?
b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings?
c. What is the return on the owners' investment in each case? Why do the returns differ?
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