Use attachment to answer the following 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. CHECK(a) Yr. 5 RNOA = 10.0%Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproducedbelow ($ millions):Income Statement DataRevenues..Operating income.Interest expense..Pretax incomeIncome taxesNet income..Year 5$542357281414Balance Sheet DataLong-term operating assets. . . . . . $ 52Working capital123Total liabilities..50Total shareholders' equity.125Year 9$979680683434$631570220Required: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.

Answer:- 1. ROEC Formula = (Net income / Shareholders equity) x 100 2. Degree of financial leverage…

Use attachment to answer the following 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.

Use attachment to answer the following 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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