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You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $38.0 million and operating income of $29.5 million. NoEquity, Incorporated, finances its $40 million in assets with $39 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $40 million in assets with no debt and $40 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. × Answer is complete but not entirely correct. NoEquity NoDebt Net income $ 20.224 million $ 23.305 million Return on asset-funders' investment 50.56% 58.26 %

You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $38.0 million and operating income of $29.5 million. NoEquity, Incorporated, finances its $40 million in assets with $39 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $40 million in assets with no debt and $40 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. × Answer is complete but not entirely correct. NoEquity NoDebt Net income $ 20.224 million $ 23.305 million Return on asset-funders' investment 50.56% 58.26 %

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $38.0 million and operating income of $29.5 million. NoEquity, Incorporated, finances its $40 million in assets with $39 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $40 million in assets with no debt and $40 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. × Answer is complete but not entirely correct. NoEquity NoDebt Net income $ 20.224 million $ 23.305 million Return on asset-funders' investment 50.56% 58.26 %
Transcribed Image Text:You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt, Incorporated), both of which operate in the same industry and have identical EBITDA of $38.0 million and operating income of $29.5 million. NoEquity, Incorporated, finances its $40 million in assets with $39 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Incorporated, finances its $40 million in assets with no debt and $40 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. Note: Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places. × Answer is complete but not entirely correct. NoEquity NoDebt Net income $ 20.224 million $ 23.305 million Return on asset-funders' investment 50.56% 58.26 %
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