Question

In: Finance

. Q Corp. has a Basic Earning Power (BEP) ratio of 15%, and has a TIE...

. Q Corp. has a Basic Earning Power (BEP) ratio of 15%, and has a TIE ratio of 6. Total assets are $100,000, and the debt-equity ratio of 1. The corporate tax rate is 40%.

Compute ROA and ROE?

Expert Solution

The formula used for all the ratios is as given below

$Basic Earning Power = Earnings Before Interest & Taxes (EBIT)/ Total Assets$

Since, Total Debt + Total Equity = Total Assets

As given, D/E = 1

Adding 1 to both sides we get,

1+ D/E = 1+1

Total Assets / Total Equity = 2

jeff jeffy answered 2 months ago

Two companies have $1M in assets and the same basic earning power ratio of 25 percent....

Two companies have $1M in assets and the same basic earning power ratio of 25 percent. Neither company owns securities, so each company’s income will be comprised solely of operating income. The only difference between the two companies is the fact that Company A’s assets are 100 percent equity financed whereas Company B’s assets are 45 percent debt financed with that debt carrying an 8 percent interest rate. If both companies have a 40 percent tax rate, find each company’s...

a. MF Corp. has an ROE of 15% and a plowback ratio of 40%. If the...

a. MF Corp. has an ROE of 15% and a plowback ratio of 40%. If the coming year's earnings are expected to be $3 per share, at what price will the stock sell? The market capitalization rate is 12%. (Round your answer to 2 decimal places. Do not round intermediate calculations.) Price $ b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price...

Thomson Trucking has $15 billion in assets, and its tax rate is 25%. Its basic earning...

Thomson Trucking has $15 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 15%, and its return on assets (ROA) is 6.25%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Thomson Trucking has $15 billion in assets, and its tax rate is 30%. Its basic earning...

Thomson Trucking has $15 billion in assets, and its tax rate is 30%. Its basic earning power (BEP) ratio is 11%, and its return on assets (ROA) is 7%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Monsto has 120$mil in total assets. its basic earning power is 12%, its times interest earned...

Monsto has 120$mil in total assets. its basic earning power is 12%, its times interest earned (TIE) ratio is 6. The tax is 35% What is its ROA?

CCC needs $1 million of assets to get started and expects itsbasic earning power ratio,...

CCC needs $1 million of assets to get started and expects its basic earning power ratio, BEP=EBIT/TA, to equal 30%. All of CCC’s income will be operating income. CCC can finance up to 80% of its assets with debt at 5%. Assuming a 30% tax rate, what is the ROE if the firm finances with 10% debt, AND what is the ROE if the firm finances with 80% debt?

TIE AND ROIC RATIOS The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it...

TIE AND ROIC RATIOS The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 12%. In addition, it has $600,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.56 million, its average tax rate is 40%, and its profit margin is 3%. What are its TIE ratio and its return on invested capital (ROIC)? Round...

An investment club has set a goal of earning 15% on the money they invest in...

An investment club has set a goal of earning 15% on the money they invest in stocks. The members are considering purchasing three possible stocks, with their cost per share (in dollars) and their projected growth per share (in dollars) summarized in the table. (Let x = computer shares, y = utility shares, and z = retail shares.) Stocks Computer (x) Utility (y) Retail (z) Cost/share 30 44 26 Growth/share 6.00 6.00 2.40 (a) If they have $392,000 to invest,...

Show a firm that is earning zero economic profits, but has some market power. Then, assume...

Show a firm that is earning zero economic profits, but has some market power. Then, assume this market power is entirely eliminated when a new competitor enters the market with the same technology and produces a perfect substitute. Showing in your diagram how the firm must adjust its production level to most effectively compete with the new entering firm, explain why maintaining competition is important.

An ideal dual cycle has a compression ratio of 15 and a cutoff ratio of 1.4....

An ideal dual cycle has a compression ratio of 15 and a cutoff ratio of 1.4. The pressure ratio during constant-volume heat addition process is 1.1. The state of the air at the beginning of the compression is P1 = 98 kPa and T1 = 24°C. Calculate the cycle’s net specific work, specific heat addition, and thermal efficiency. Use constant specific heats at room temperature.