You are considering stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $38.5 million and operating income of $24.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 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. (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.) Net income Return on assets NoEquity NoDebt million % million %
You are considering stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $38.5 million and operating income of $24.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 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. (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.) Net income Return on assets NoEquity NoDebt million % million %
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
Related questions
Question
![You are considering stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same
industry and have identical EBITDA of $38.5 million and operating income of $24.5 million. NoEquity, Inc., finances its $70 million in
assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70
million in assets with no debt and $70 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. (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.)
Net income
Return on assets
NoEquity
NoDebt
million
%
million
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F552a1a70-5e1d-4fb4-b9c5-6c02096fb958%2Fff2a758c-2081-40ae-b86a-20f6a8934f7e%2F42x293t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You are considering stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same
industry and have identical EBITDA of $38.5 million and operating income of $24.5 million. NoEquity, Inc., finances its $70 million in
assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70
million in assets with no debt and $70 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. (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.)
Net income
Return on assets
NoEquity
NoDebt
million
%
million
%
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