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- CONCEPTUAL: RETURN ON EQUITY Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16 as you think about 4-17.) a. If a firms expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, adding assets and financing them with debt will raise the firms expected return on common equity (ROE). b. The higher a firms tax rate, the lower its BEP ratio, other things held constant. c. The higher the interest rate on a firms debt, the lower its BEP ratio, other things held constant. d. The higher a firms debt ratio, the lower its BEP ratio, other things held constant. e. Statement a is false, but statements b, c, and d are true.Looking at Morningstars Profitability ratios, what has happened to Hewlett Packards profit margin (net margin %) over the past 10 years? What has happened to its return on assets (ROA) and return on equity (ROE) over the past 10 years?As a consultant to Bass Inc, you have been provided with the following data D1= $0.67, P0= $27.50 and gl=8%. What is the cost of common from invested earning based on the dividend growth approach? (11.51%, 10.44%, 9.91%, 9.42%, or 10.96%)
- H3. A firm wishes to maintain an sustainable growth rate of 9 percent and a dividend payout ratio of 64 percent. The ratio of total assets to sales is constant at 0.9, and the profit margin is 10.1 percent. If the firm also wishes to maintain a constant debt-equity ratio, what must it be? Please show proper step by step calculationGive typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).Don't provide handwritten solution... The Return on Equity (ROE) of Company Q is 8.8%. If the industry average of ROE is 3.7%, is company Q exhibiting higher / lower profitability than the average firms in the industry?
- 4.Easy Corp.’s return on assets measure is 0.20 (20%. Its return on equity measure is 0.25 (25%). What is the firm’s equity multiplier? (Please show work and explain)Item Company V Company U Dividend growth 41.8% 33.3% Dividend Payout 19.6% 31.1% Dividend Coverage (annual period) 5.9 5.4 Current Div. yield 0.3% 1.5% Based on the information above which company has a better dividend performance? Justify your answerJ 8, The Time Teller Ltd has a net profit margin of 10,5%, total asset turnover of 1,75 and return on equity (ROE) of 24,50%. What is this company's financial leverage multiplier?
- A firm has decided that its optimal capital structure is 100% equity-financed. It perceives its optimal dividend policy to be a 60% payout ratio. Asset turnover is sales/assets = 0.6, the profit margin is 10%, and the firm has a target growth rate of 3%. a-1. Calculate the sustainable growth rate. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) a-2. Is the firm’s target growth rate consistent with its other goals? b. If the firm’s target growth rate is not consistent with its other goals, what would asset turnover need to be to achieve its goals? (Do not round intermediate calculations. Round your answer to 3 decimal places.) c. If the firm’s target growth rate is not consistent with its other goals, how high would the profit margin need to be to achieve its goals? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)Estimating Cost of Equity Capital Assume that a company’s market beta equals 0.8, the risk-free rate is 5%, and the market return equals 8%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%