Question

1. Thomson Trucking has $15 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 10%, and its return on assets (ROA) is 7.25%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

2. Pacific Packaging's ROE last year was only 4%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 45%, which will result in annual interest charges of $874,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,615,000 on sales of $19,000,000, and it expects to have a total assets turnover ratio of 3.6. Under these conditions, the tax rate will be 25%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places. Answer in percentage.

Answer 1