Problem 14-13 18 A firm has an ROE of 2%, a debt/equity ratio of 0.4, a...

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Problem 14-13 18 A firm has an ROE of 2%, a debt/equity ratio of 0.4, a tax rate of 40%, and pays an interest rate of 7% on i

business finance

Answer 1

Answer #1

$ROE ROA== Equity + Debt 1 - TaxRate Debt Interest Rate Equity + Debt$

ROA = (1/1.4)*(0.02/0.60) + (0.4/1.4)*0.07

ROA = 0.0438 or 0.04

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Answer 2

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