Answer the following questions based on the information in the table. Assume a tax rate of 30 percent. For simplicity, assume that thecompanies have no other liabilities other than the debt shown. (All dollars are in millions.)Earnings before interest and taxesDebt (at 7% interest)Equitya. Calculate each company's ROE, ROA, and ROIC.Note: Round your answers to 1 decimal place.× Answer is not complete.AtlanticCorporationPacificCorporationROE35.3%%ROAROIC%%%%AtlanticPacificCorporation Corporation$ 530$ 530$ 310$ 1,630$ 1,050$ 370

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 3P

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Fujita, Incorporated, has no debt outstanding and a total market value of $450,000. Earnings before interest and taxes, EBIT, are projected to be $57,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 16 percent higher. If there is a recession, then EBIT will be 24 percent lower. The company is considering a $215,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 9,000 shares outstanding. Ignore taxes for questions (a) and (b). Assume the company has a market- to-book ratio of 1.0 and the stock price remains constant. a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be…
Problem 16-3 ROE and Leverage [LO1, 2] Fujita, Incorporated, has no debt outstanding and a total market value of $356,900. Earnings before Interest and taxes, EBIT, are projected to be $50,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 16 percent higher. If there is a recession, then EBIT will be 25 percent lower. The company is considering a $180,000 debt Issue with an interest rate of 5 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,300 shares outstanding. Ignore taxes for questions (a) and (b). Assume the company has a market- to-book ratio of 1.0 and the stock price remains constant. a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Calculate the percentage changes in ROE when the economy expands or enters a…
Assume the firm has a tax rate of 23 percent. c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is Issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-4. Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round…
A firm has an ROE of 2%, a debt/equity ratio of 0.6, a tax rate of 30%, and pays an interest rate of 7% on its debt. What is its operating ROA? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ROA %
(please type answer fast.)
Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 2.0, and its working capital is $360,000. Answer each of the following questions independently, always referring to the original information. Required: How much does the firm have in current liabilities? Note: Do not round intermediate calculations. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? Note: Do not round intermediate calculations. If the firm collects an account receivable of $119,000, what will its new current ratio and working capital be?
A firm has an ROE of 4%, a debt/equity ratio of 0.4, a tax rate of 35%, and pays an interest rate of 5% on its debt. What is its operating ROA? (Do not round intermediate calculations.Round your answer to 2 decimal places.) ROA %
You have the following information about two firms, Debt Free, Incorporated and Debt Spree, Incorporated. Both firms have the same prospects for sales and EBIT, and both have the same level of assets, tax rate and borrowing rate. They differ in their use of debt financing. Scenario Bad year Normal year Good year Total assets Tax rate Debt Equity Borrowing rate Sales Interest expense for Debt Free Interest expense for Debt Spree $200 $275 $380 Debt Free $ 250 21% EBIT $12 $ 34 $ 51 $0 $ 250 16% Required: a. Calculate the interest expense for each firm: Debt Spree $ 250 21% $150 $ 100 16%
only looking for parts c-1 and c-3
A firm has net income before interest and taxes of $ 193,000 and interest expense of $28, 100. What is the times interest - earned ratio? Note: Round your answer to 2 decimal places. -
Can you please help me
Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 1.5, and its working capital is $330,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? Note: Do not round intermediate calculations. b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? Note: Do not round intermediate calculations. c. If the firm collects an account receivable of $101,000, what will its new current ratio and working capital be? Note: Round "Current ratio" to 1 decimal place. d. If the firm pays an account payable of $53,000, what will its new current ratio and working capital be? Note: Do not round intermediate calculations. Round "Current ratio" to 1 decimal place. e. If the firm sells inventory that was purchased for $50,000 at a cash price…

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