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

Answered: Image /qna-images/answer/83c50ef5-0ebe-4bdb-a19c-edaddf108579.jpg

Answered: Answer the following questions based on…

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

See similar textbooks

Similar questions

Answer the following questions based on the information in the table. Assume a tax rate of 30 percent. For simplicity, assume that the companies have no other liabilities other than the debt shown. (All dollars are in millions.) \table[[,\table[[Atlantic],[Corporation]],Pacific],[Earnings before interest and taxes,$470,$470
Give only typing answer with explanation and conclusion Byron Books Inc. recently reported $18 million of net income. Its EBIT was $34.3 million, and its tax rate was 25%. What was its interest expense? (Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $18 million of net income by (1 - T) = 0.75 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary. Do not round intermediate calculations.
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…
Create an income statement and a balance sheet from the information below (this information is repeated but remains the same on other questions). Assume that the income tax rate for Peter's cookies is 6% and Peter's cookies does not incur any additional debt, issue any additional stock or distribute any dividends (hint: round up taxes to next whole dollar and net income is equal to retained earnings). Financial data Cash Cost of goods sold Short term debt Sales(revenue) Building Long term debt Expenses Inventory Interest expense $88,666 $66,688 $88,866 12,000 $66,888 90,555 100,000 241,055 175,000 Equipment 32,733 Accounts payable 122,000 Accounts receivable 36,000 Equity 35,000 Marketable securities 150,000 As of December 31, 2012 what is the net income for Peter's Cookies 120,000 73,555 37,955 6,000
Note: The rate of interest on Epona's overdraft is 10 per cent per annum. Required: a. Calculate four ratios for each company showing profitability and five showing liquidity. (Use 365 days a year. Round your trade receivable days and credit period ratio answers to 1 decimal place, and all other answers to 2 decimal places.) find profit before interest and tax, return on capital employed (before interest and tax), capital turnover and credit period ratio.
Please Need Correct answer
A firm has an ROE of 2%, a debt/equity ratio of 0.4, and a tax rate of 40%, 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.).
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 %
Bank ABC has a Return on Equity (ROE) equal to 22%, a total debt ratio (debt/total assets) equal to 0.9 and an asset utilisation ratio equal to 0.05. From this we know that the profit margin of bank ABC is: (NOTE: By default, the unit of the answer is %. The answer must be input with two 2 decimal places, i.e. if the answer is 12%, please input 12.00) Answer:
a)Assume that the following data is extracted from the financial statements of Richy-Rich bank: equity is $350 million, interest expense is $115 million, provision for loan loss (P) is $35 million, noninterest income is $30 million, noninterest expense is $50 million and a tax rate is 33%. What is the minimum total interest income required to give a return on equity (ROE) of 20%? Show workings when necessary. b) Be-smart Bank reported an equity multipler ratio of 6.5 at the end of year 2021. If the bank’s total debt at the end of year 2021 was $5 million, how much of its assets were financed with equity? Show calculations when necessary. c) What are the main sources of funding for commercial banks? Using bullet points, classify these sources and briefly describe each category.

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS