Problem 2-7 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.) Earnings before interest and taxes Debt (at 7% interest) Equity a. Calculate each company's ROE, ROA, and ROIC. Note: Round your answers to 1 decimal place. Atlantic Corporation Pacific Corporation ROE % % ROA % % ROIC % % $ 550 $ 310 $ 1,070 Atlantic Pacific Corporation Corporation $ 470 $ 1,650 $ 370
Problem 2-7 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.) Earnings before interest and taxes Debt (at 7% interest) Equity a. Calculate each company's ROE, ROA, and ROIC. Note: Round your answers to 1 decimal place. Atlantic Corporation Pacific Corporation ROE % % ROA % % ROIC % % $ 550 $ 310 $ 1,070 Atlantic Pacific Corporation Corporation $ 470 $ 1,650 $ 370
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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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:Problem 2-7
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.)
Earnings before interest and taxes
Debt (at 7% interest)
Equity
a. Calculate each company's ROE, ROA, and ROIC.
Note: Round your answers to 1 decimal place.
Atlantic Corporation Pacific Corporation
ROE
%
%
ROA
%
%
ROIC
%
%
$ 550
$ 310
$ 1,070
Atlantic
Pacific
Corporation Corporation
$ 470
$ 1,650
$ 370
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