A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion. The company’s total assets equal total invested capital, and its capital consists of half debt and half common equity. The firm’s interest rate is 5% and its tax rate is 40%. a. What is its profit margin? b. What is its ROA? c. What is its ROE? d. What is its ROIC? e. Would this firm’s ROA increase if it used less leverage? (The size of the firm does not change.)
A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion. The company’s total assets equal total invested capital, and its capital consists of half debt and half common equity. The firm’s interest rate is 5% and its tax rate is 40%. a. What is its profit margin? b. What is its ROA? c. What is its ROE? d. What is its ROIC? e. Would this firm’s ROA increase if it used less leverage? (The size of the firm does not change.)
Related questions
Question
A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion. The
company’s total assets equal total invested capital, and its capital consists of half debt and half
common equity. The firm’s interest rate is 5% and its tax rate is 40%.
a. What is its profit margin?
b. What is its
c. What is its
d. What is its
e. Would this firm’s ROA increase if it used less leverage? (The size of the firm does not
change.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.