Question

A firm has an ROE of 4%, a debt/equity ratio of 1.0, a tax rate of 20%, and an interest rate on debt of 5%. What is its operating ROA?

Answer #1

A firm has an ROE of 9%, a debt/equity ratio of 0.3, a tax rate
of 30%, and pays an interest rate of 6% on its debt. Firm’s asset
turnover is 0.3
-What is firm’s operating ROA?
-What is the firm’ Margin
- What is the firms Tax burden?
- What is the firm’s Leverage factor?
- Given ROA that you found, what percentage of its total ROA
firm has to pay as interest?
- What is the firm’s interest...

A firm has an ROE of 2%, a debt/equity ratio of 0.6, a tax rate
of 30%, and pays an interest rate of 7% on its debt. What is its
operating ROA? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)

A firm has an ROE of 6%, a debt/equity ratio of 0.7, a tax rate
of 35%, and pays an interest rate of 6% on its debt. What is its
operating ROA? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)

If a firm has a positive tax rate and a positive operating ROA,
and the interest rate on debt is the same as the operating ROA,
then operating ROA will be_______.
A.
equal to ROE
B.
less than ROE
C.
greater than ROE
D.
greater than zero, but it is impossible to determine how
operating ROA will compare to ROE

The equity beta of a firm is 0.8. The firm’s tax rate is 34%.
The debt-to-equity ratio is 1.0. What is the firm’s unlevered beta
(asset beta)?

A firm has a debt to equity ratio of 2/3. Its cost of equity
is 15.2%, cost of debt is 4%, and tax rate is 35%. Assume that the
risk-free rate is 4%, and market risk premium is 8%.
Suppose the firm repurchases stock and finances the
repurchase with debt, causing its debt to equity ratio to change to
3/2:
What is the firm’s WACC before and after the change in
capital structure?
Compute the firm’s new equity beta and...

A company currently has the debt-to-equity ratio of 1/3. Its
cost of debt is 4% before tax and its cost of equity is 12%. Assume
that the company is considering raising the debt-to-equity ratio to
1/2. The tax rate is 20%. What is its new cost of equity under the
new debt-to-equity ratio? What is its new weighted average cost of
capital (WACC) under the new debt-to-equity ratio.

Summit Builders has a market debt-equity ratio of 1.70, a
corporate tax rate of 40 %, and pays 8 % interest on its debt. By
what amount does the interest tax shield from its debt lower
Summit's WACC?

Your firm has a debt-equity ratio of .75. The interest rate on
the debt is 8.5% and the unlevered cost of equity is 15%. What is
the cost of equity if there are no taxes?
11.25%
19.88%
21.38%

Summit Builders has a market debt-equity ratio of
0.650.65
and a corporate tax rate of
35 %35%,
and it pays
7 %7%
interest on its debt. The interest tax shield from its debt
lowers Summit's WACC by what amount?

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