PROBLEM 8-5 Disaggregating and Analyzing Return on Common Equity CHECK (a) Yr. 5 RNOA = 10.0% Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproduced below ($ millions): Income Statement Data Revenues.. Operating income.. Interest expense.. Pretax income Income taxes Net income.. Balance Sheet Data Long-term operating assets... Working capital Total liabilities... Total shareholders' equity Year 5 $542 35 7 28 14 14 $ 52 123 50 125 Year 9 $979 68 0 68 34 34 $63 157 0 220 Required: a. Calculate return on common equity and disaggregate ROCE for Years 5 and 9 using end-of-year values for com- putations requiring an average (assume fixed assets and working capital are operating and a 50% tax rate). b. Comment on Texas Telecom's use of financial leverage.

PROBLEM 8-5 Disaggregating and Analyzing Return on Common Equity CHECK (a) Yr. 5 RNOA = 10.0% Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproduced below ($ millions): Income Statement Data Revenues.. Operating income.. Interest expense.. Pretax income Income taxes Net income.. Balance Sheet Data Long-term operating assets... Working capital Total liabilities... Total shareholders' equity Year 5 $542 35 7 28 14 14 $ 52 123 50 125 Year 9 $979 68 0 68 34 34 $63 157 0 220 Required: a. Calculate return on common equity and disaggregate ROCE for Years 5 and 9 using end-of-year values for com- putations requiring an average (assume fixed assets and working capital are operating and a 50% tax rate). b. Comment on Texas Telecom's use of financial leverage.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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