Duffert Industries has total assets of $1,050,000 and total current liabilities (consisting only of accounts payable and accruals)of $150,000.Duffert finances using only long-term debt and common equity.The interest rate on its debt is 9% and its tax rate is 40%.The firm's basic earning power ratio is 15% and its debt-to capital rate is 40%.What are Duffert's ROE and ROIC? Do not round your intermediate calculations.
A) 9.04%;8.93%
B) 11.26%;9.14%
C) 12.65%;10.19%
D) 13.90%;10.50%
E) 16.12%;11.66%

Question

Quizplus · Accepted Answer

11ea856c_8bf4_0a2d_9aec_7dbb33875d88_TB1222_00 ?
Now calculate EBIT:
BEP = 0.15 = EBIT/TA = EBIT/$1,050,000
EBIT = $157,500
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Calculate ROIC: ROIC = [EBIT(1 - T)]/(D + E)= [$157,500(0.6)]/$900,000 = 10.50%
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Now determine net income from income statement: 11ea856c_8bf4_0a2e_9aec_7535958c1a72_TB1222_00 ?
ROE = NI/E = $75,060/$540,000 = 13.90%
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Duffert Industries Has Total Assets of $1,050,000 and Total Current