A firm has total assets of $1 million and a debt ratio of 30%. Currently, it has sales of $2.5 million; total fixed costs of $1.0 million, and EBIT of $50,000. If the firm's before- tax cost of debt is 10% and the firm's tax rate is 40%, what is the firm's ROE?
A firm has total assets of $1 million and a debt ratio of 30%. Currently, it has sales of $2.5 million; total fixed costs of $1.0 million, and EBIT of $50,000. If the firm's before- tax cost of debt is 10% and the firm's tax rate is 40%, what is the firm's ROE?
Chapter17: Multinational Capital Structure And Cost Of Capital
Section: Chapter Questions
Problem 12QA
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