What is the ROE for a firm with a times interest earned ratio of 2, a tax liability of $1 million, and interest expense of $1.5 million if equity equals $1.5 million? A. 26.67% B. 30.00% C. 33.33% D. 50.00% Wizard Co. is considering a project that will require $650,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 40%. What will be the ROE (return on equity) for this project if it produces an EBIT of -$40,000? When calculating the tax effects, assume that Wizard Co. as a whole will have a large, positive income this year. O - 3.0% O-3.7% O-4.4% 0 -3.1%
What is the ROE for a firm with a times interest earned ratio of 2, a tax liability of $1 million, and interest expense of $1.5 million if equity equals $1.5 million? A. 26.67% B. 30.00% C. 33.33% D. 50.00% Wizard Co. is considering a project that will require $650,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 40%. What will be the ROE (return on equity) for this project if it produces an EBIT of -$40,000? When calculating the tax effects, assume that Wizard Co. as a whole will have a large, positive income this year. O - 3.0% O-3.7% O-4.4% 0 -3.1%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:What is the ROE for a firm with a times
interest earned ratio of 2, a tax liability of $1
million, and interest expense of $1.5 million
if equity equals $1.5 million? A. 26.67% B.
30.00% C. 33.33% D. 50.00% Wizard Co. is
considering a project that will require $650,000 in assets.
The project will be financed with 100% equity. The company
faces a tax rate of 40%. What will be the ROE (return on
equity) for this project if it produces an EBIT of -$40,000?
When calculating the tax effects, assume that Wizard Co.
as a whole will have a large, positive income this year. O -
3.0% O-3.7% O-4.4% 0 -3.1%
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