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isaiahromero15
18.02.2020 •
Business
Broward Manufacturing recently reported the following information: Net income $365,000 ROA 7% Interest expense $127,750 Accounts payable and accruals $1,050,000 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). Do not round intermediate calculations. Round your answers to two decimal places.
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Ответ:
BEP = 14.11%
ROE = 14.6%
ROIC = 10.60%
Explanation:
Calculate its basic earning power (BEP)
The formula for BEP is
BEP = EBIT / Total Assets
To find Total Assets, we can use the ROA formula:
ROA = Net Income / Total Assets
7% = $365,000 / Total Assets
Total Assets = $365,000 / 7%
= $5,214,285.714
Now, we must find the EBIT, which means Earnigns Before Interest and Taxes.
We have a net income of $365,000. The tax rate is 40%. We solve the following formula to find the tax expense:
Tax Expense = $365,000 / ((1 - 40%) / 40%)
= $243,333.333
Now, we add the net income, the tax expense that we found above, and the interest expense:
EBIT = $365,000 + $243,333.333 + $127,750
= $736,083.333
Finally we can find the BEP:
BEP = $736,083.333 / $5,214,285.714
= 0.1411
= 14.11%
2) To find the return on equity, we must first find the common equity
Total Invested Capital = Total Assets - Accounts Payable and Accruals
= $5,214,285.714 - $1,050,000
= $4,164,285.714
Common Equity = Total Invested Capital x 60%
= $4,164,285.714 x 60%
= $2,498,571.428
Now we can solve for ROE
ROE = Net Income / Common Equity
= $365,000 / $2,498,571.428
= 0.1460
= 14.6%
3) To find the return on invested capital, we use this formula:
ROIC = EBIT(1 - T) / Total Invested Capital
= $736,083.333 (1 - 40%) / $4,164,285.714
= 0.1060
= 10.60%
Ответ:
Fixed costs = $12,000,000
Selling price = $37.50
Variable cost = $12.80
hope this helps