Denis Jahnke
Denis Jahnke answered
Young Enterprises Has $2 Million In Assets, $400,000 Of EBIT, And Has A 40% Tax Rate. The Firm Also Has A Debt-to-assets Ratio Of 50% And Pays 12% Interest On Its Debt. What Is Young's ROE?
16.80   Net Income= 400000 - (1mn x 0.12) x (1- toll rate) = (400000 - 120000 ) 0.60= 168000 ROE = 168000/1000000=0.168 or 16.8% Note: Debt/assets = 50% so equity is the rest that is 50%. So if assets is 2 mn and liability 1mn which is debt, equity is 2 - 1= 1 … Read more