Homework Answers
Earnings before tax (EBT) = Net income / ( 1 - Tax % ) = $445,000 / ( 1 - 35% ) = $684,615
Earnings before interest and tax (EBIT) = EBT + Interest expenses = $684,615 + $151,300 = $835,915
ROA = Net income / Total assets
7% = $445,000 / Total assets
Total assets = $445,000 / 7% = $6,357,143
Total invested capital = Total assets - Account payables and accruals = $6,357,143 - $1,050,000 = $5,307,143
Common equity = 60% * Total invested capital = 60% * $5,307,143 = $3,184,286
Basic earning power (BEP) = EBIT / Total assets = $835,915 / $6,357,143 = 13.15%
Return on equity (ROE) = Net income / Equity = $445,000 / $3,184,286 = 13.97%
Return on invested capital (ROIC) = EBIT ( 1 - tax% ) / Total invested capital = $835,915 ( 1 - 35% ) / $5,307,143 = 10.24%
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