The total resources of YVONNE Company is Php 20 million. Of this amount, 40% is in the form of current assets and the remaining 60% is in the form of fixed assets. The interest of ordinary shares to the assets of YVONNE is 40% and the remaining 60% is financed by outside creditors. Of the 60%, 40% is sourced from short-term credits and the balance is funded by long-term debts. The interest rate on the short-term debt is 8% while the long term debt has 15% interest rate. The business is expected to earn Php 5 million before interest and taxes. The applicable tax rate is 30%. Required : Compute the expected Return on Equity.

The total resources of YVONNE Company is Php 20 million. Of this amount, 40% is in the form of current assets and the remaining 60% is in the form of fixed assets. The interest of ordinary shares to the assets of YVONNE is 40% and the remaining 60% is financed by outside creditors. Of the 60%, 40% is sourced from short-term credits and the balance is funded by long-term debts. The interest rate on the short-term debt is 8% while the long term debt has 15% interest rate. The business is expected to earn Php 5 million before interest and taxes. The applicable tax rate is 30%. Required : Compute the expected Return on Equity.

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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