What is return on equity If a bank has a leverage ratio of 0.1 and a return oncapital of 2%, what is its return on equity?A) 0.2%B) 2.1%C) 5%D) 20%

The return on equity (ROE) can be calculated using the following formula: ROE=Return on…

Answered: If a bank has a leverage ratio of 0.1…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 5MC: What happens to ROE for Firm U and Firm L if EBIT falls to $1,600? What happens if EBIT falls to...

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Bank ABC has a Return on Equity (ROE) equal to 24%, an equity/debt ratio equal to 0.05 and an asset utilisation ratio equal to 0.07. From this we know that the profit margin of bank ABC is?
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Want to this question answer general Accounting
A)What is the amount of RSA, RSL and the income gap amount? B) Calculate the duration gap. C)What is the change in this bank’s net income if the interest rises by 1%, does it go up or does it go down? Show work D) What happens when the interest rises by 1% to this bank’s asset value, liability value and the net worth in dollar amounts? Show work.
What happens to ROE for Firm U and Firm L if EBIT falls to $1,600? What happens if EBIT falls to $1,200? What is the after-tax cost of debt? What does this imply about the impact of leverage on risk and return?
You have the following information on a company on which to base your calculations and discussion: Cost of equity capital (rE) = 18.55% Cost of debt (rD) = 7.85% Expected market premium (rM –rF) = 8.35% Risk-free rate (rF) = 5.95% Inflation = 0% Corporate tax rate (TC) = 35% Current long-term and target debt-equity ratio (D:E) = 2:5 a. What are the equity beta (bE) and debt beta (bD) of the firm described above?[Hint: Assume that the above costs of capital have been generated by an appropriate equilibrium model.] b. What is the weighted-average cost of capital (WACC) for this firm at the current debt-equity ratio? c. What would the company’s cost of equity capital become if you unlevered the capital structure (i.e. reduced gearing until there is no debt)
What is the cost of equity for a firm where the required return on assets is 15.71%, the cost of debt is 6.92%, and the target debt/equity ratio is 1.19? Ignore taxes. O A) 19.05%
A firm has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes.
Assume the following ratioes are constant
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If a bank has a leverage ratio of 0.1 and a return on capital of 2%, what is its return on equity? A) 0.2% B) 2.1% C) 5% D) 20%