Need help accounting XYZ Inc. has a debt to equity ratio of 0.5, $20000 of debt with an interest rate of 5%, 10 000shares outstanding, a 10% expected returns onassets, and a 30% tax rate. Assuming aconstant amount of debt, compute theexpected return of equity.

To find the expected return on equity (ROE), we'll use the formula based on the DuPont identity:ROE…

Answered: XYZ Inc. has a debt to equity ratio of…

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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Xyz accounting. Solve this question
A firm has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes.
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XYZ Inc. has a debt to equity ratio of 0.5, $20 000 of debt with an interest rate of 5%, 10 000 shares outstanding, a 10% expected returns on assets, and a 30% tax rate. Assuming a constant amount of debt, compute the expected return of equity.