Question

In: Finance

BEP, ROE, AND ROIC Broward Manufacturing recently reported the following information: Net income $285,000 ROA 10%...

BEP, ROE, AND ROIC

Broward Manufacturing recently reported the following information:

Net income $285,000
ROA 10%
Interest expense $91,200
Accounts payable and accruals $950,000

Broward's tax rate is 35%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Round your answers to two decimal places.

Solutions

Expert Solution

net income (profit after tax) $285,000
tax @35% so profit before tax $285000 /65% $438461.54
+interest expense $91200
EBIT(earnings before interest&tax) $438461.54+$91200= $529661.54
NOPAT(netoperating profit after tax) EBIT(1-TAX rate) $344,280

ROA( return on assets)=> net income / total value of assets

total /average value of assets=net income /return on assets

=$285000 /10% =>$2850,000

in the balancesheet total value of assets =total value of equity & liabilities

table 2

total value of equity&liabilities $2850,000
less: accounts payable $ 950000
value of equity & debt $1900,000
value of debt (40% in whole finance) $1900,000*40% $760000
value of equity(60% in whole finance) $1900,000*60% $1140,000

1)BASIC EARNING POWER= EBIT / TOTAL VALUE OF ASSETS

=$529,661.54 / $2850,000 =18.58%

2) RETURN ON EQUITY =NET INCOME / AVG.SHAREHOLDERS EQUITY

=$285,000 / $ 1140,000 = 25%

3) RETURN ON INVESTED CAPITAL = NOPAT / INVESTED CAPITAL

=$ 344,280 / $ 2850,000=12.08%

i gave the exact calculations if u want u can round off to the nearest decimals


Related Solutions

5.  Problem 4.09 (BEP, ROE, and ROIC) eBook Problem Walk-Through Broward Manufacturing recently reported the following information:...
5.  Problem 4.09 (BEP, ROE, and ROIC) eBook Problem Walk-Through Broward Manufacturing recently reported the following information: Net income $768,000 ROA 8% Interest expense $268,800 Accounts payable and accruals $1,000,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return...
Broward Manufacturing recently reported the following information: Net income $642,000 ROA 10% Interest expense $231,120 Accounts...
Broward Manufacturing recently reported the following information: Net income $642,000 ROA 10% Interest expense $231,120 Accounts payable and accruals $1,050,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations....
Broward Manufacturing recently reported the following information: Net income $717,000 ROA 10% Interest expense $279,630 Accounts...
Broward Manufacturing recently reported the following information: Net income $717,000 ROA 10% Interest expense $279,630 Accounts payable and accruals $1,050,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations....
Broward Manufacturing recently reported the following information: Net income $231,000 ROA 10% Interest expense $87,780 Accounts...
Broward Manufacturing recently reported the following information: Net income $231,000 ROA 10% Interest expense $87,780 Accounts payable and accruals $1,000,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations....
4.9 Broward Manufacturing recently reported the following information: Net income $597,000 ROA 10% Interest expense $220,890...
4.9 Broward Manufacturing recently reported the following information: Net income $597,000 ROA 10% Interest expense $220,890 Accounts payable and accruals $1,050,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate...
Broward Manufacturing recently reported the following information: Net income $558,000 ROA 10% Interest expense $184,140 Accounts...
Broward Manufacturing recently reported the following information: Net income $558,000 ROA 10% Interest expense $184,140 Accounts payable and accruals $950,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations....
4.9 eBook Problem Walk-Through Broward Manufacturing recently reported the following information: Net income $402,000 ROA 10%...
4.9 eBook Problem Walk-Through Broward Manufacturing recently reported the following information: Net income $402,000 ROA 10% Interest expense $120,600 Accounts payable and accruals $1,050,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do...
Broward Manufacturing recently reported the following information: Net income $725,000 ROA 9% Interest expense $282,750 Accounts...
Broward Manufacturing recently reported the following information: Net income $725,000 ROA 9% Interest expense $282,750 Accounts payable and accruals $950,000 Broward's tax rate is 40%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Round your answers to two...
Broward Manufacturing recently reported the following information: Net income $600,000 ROA 6% Interest expense $192,000 Accounts...
Broward Manufacturing recently reported the following information: Net income $600,000 ROA 6% Interest expense $192,000 Accounts payable and accruals $950,000 Broward's tax rate is 40%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Round your answers to two...
Broward Manufacturing recently reported the following information: Net income $297,000 ROA 8% Interest expense $92,070 Accounts...
Broward Manufacturing recently reported the following information: Net income $297,000 ROA 8% Interest expense $92,070 Accounts payable and accruals $1,000,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT