Confu Inc. expects to have the following data during the coming year. What is the firm's expected ROE? Assets $200,000 Interest rate 8%
Debt/Assets, book value 65% Tax rate 40%
EBIT $25,000
A) 12.51%
B) 13.14%
C) 13.80%
D) 14.49%
E) 15.21%

Question

Quizplus · Accepted Answer

ROE = (EBIT * (1 - Tax rate)) / (Assets * (1 - Debt/Assets) * (1 + Interest rate))= (25,000 * (1 - 0.4)) / (200,000 * (1 - 0.65) * (1 + 0.08))= 15,000 / 76,000= 0.1974= 19.74%

Confu Inc Expects to Have the Following Data During the Coming