Business, 21.11.2019 03:31 plshelp8227
Firms hl and ll are identical except for their financial leverage ratios and the interest rates they pay on debt. each has $20 million in invested capital, has $4 million of ebit, and is in the 40% federal-plus-state tax bracket. firm hl, however, has a debt-to-capital ratio of 50% and pays 12% interest on its debt, whereas ll has a 30% debt-to-capital ratio and pays only 10% interest on its debt. neither firm uses preferred stock in its capital structure. a. calculate the return on invested capital (roic) for each firm. b. calculate the return on equity (roe) for each firm. c. observing that hl has a higher roe, ll’s treasurer is thinking of raising the debt-to-capital ratio from 30% to 60% even though that would increase ll’s interest rate on all debt to 15%. calculate the new roe for ll.
Answers: 2
Business, 22.06.2019 17:00
You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. the portfolio's beta is 1.12. you plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.50. what will the portfolio's new beta be? do not round your intermediate calculations.
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Business, 22.06.2019 19:00
All of the following led to the collapse of the soviet economy except a. a lack of worker incentives. c. inadequate supply of consumer goods. b. a reliance on production quotas. d. the introduction of a market economy.
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Business, 22.06.2019 20:00
River corp's total assets at the end of last year were $415,000 and its net income was $32,750. what was its return on total assets? a. 7.89%b. 8.29%c. 8.70%d. 9.14%e. 9.59%
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Business, 22.06.2019 20:00
What part of the rational model of decision-making does the former business executive “elliott” have a problem completing?
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