Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its excess cash in 2009 is $23.4.If EBIT is 41.2 and tax rate is 35%,its Return on Invested Capital in 2009 is closest to:
A)0.104
B)0.064
C)0.038
D)0.068

Question

Quizplus · Accepted Answer

D)Net Debt = 10.5 + 39.9 + 239.7 - 23.4 = 266.7
Return on Invested Capital = EBIT(1 - t)/Book value of equity + Net debt = 41.2(1 - 0.35)/(126.6 + 266.7)= 0.068

Luther Corporation's Stock Price Is $39 Per Share and the Company