Universal Exports Inc. is a small company and is considering a project that will require $650,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $155,000? 10.73% 17.88% 18.77% 12.52% Determine what the project’s ROE will be if its EBIT is –$50,000. When calculating the tax effects, assume that Universal Exports Inc. as a whole will have a large, positive income this year. -4.64% -6.67% -5.22% -5.8% Universal Exports Inc. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company’s debt will be 12%. What will be the project’s ROE if it produces an EBIT of $155,000? 28.11% 18.74% 26.77% 21.42%
Universal Exports Inc. is a small company and is considering a project that will require $650,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $155,000? 10.73% 17.88% 18.77% 12.52% Determine what the project’s ROE will be if its EBIT is –$50,000. When calculating the tax effects, assume that Universal Exports Inc. as a whole will have a large, positive income this year. -4.64% -6.67% -5.22% -5.8% Universal Exports Inc. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company’s debt will be 12%. What will be the project’s ROE if it produces an EBIT of $155,000? 28.11% 18.74% 26.77% 21.42%
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 5P
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Universal Exports Inc. is a small company and is considering a project that will require $650,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity ) for this project if it produces an EBIT (earnings before interest and taxes) of $155,000?
10.73%
17.88%
18.77%
12.52%
Determine what the project’s ROE will be if its EBIT is –$50,000. When calculating the tax effects, assume that Universal Exports Inc. as a whole will have a large, positive income this year.
-4.64%
-6.67%
-5.22%
-5.8%
Universal Exports Inc. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company’s debt will be 12%. What will be the project’s ROE if it produces an EBIT of $155,000?
28.11%
18.74%
26.77%
21.42%
What will be the project’s ROE if it produces an EBIT of –$50,000 and it finances 50% of the project with equity and 50% with debt? When calculating the tax effects, assume that Universal Exports Inc. as a whole will have a large, positive income this year.
-20.54%
-18.49%
-21.57%
-25.67%
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