ROE = NI/S S/TA TA/E 0.12 = NI/$6,000,000 3.2 $1,875,000/$937,500 0.12 = $720,000 = 6.4NI $112,500 = NI. 4-9 Calculate BEP: ROA = 8%; Net income = $600,000; TA = ? ROA = 8% = TA = $7,500,000. To calculate BEP, we still need EBIT. To calculate EBIT construct a partial income statement: EBIT $1,148,077 $225,000 + $923,077 Interest 225,000 (Given) EBT $ 923,077 $600,000/0.65 Taxes (35%) 323,077 NI $ 600,000 BEP = = = 0.1531 = 15.31%. Calculate ROE: We need to determine common equity from total assets calculated above and the accounts payable and accrual balance given in the problem. Accounts payable and accruals $1,000,000 Debt ? Equity ? Total claims = Total assets $7,500,000 Therefore, Debt + Equity = $6,500,000 = Total invested capital.
ROE = NI/S S/TA TA/E 0.12 = NI/$6,000,000 3.2 $1,875,000/$937,500 0.12 = $720,000 = 6.4NI $112,500 = NI. 4-9 Calculate BEP: ROA = 8%; Net income = $600,000; TA = ? ROA = 8% = TA = $7,500,000. To calculate BEP, we still need EBIT. To calculate EBIT construct a partial income statement: EBIT $1,148,077 $225,000 + $923,077 Interest 225,000 (Given) EBT $ 923,077 $600,000/0.65 Taxes (35%) 323,077 NI $ 600,000 BEP = = = 0.1531 = 15.31%. Calculate ROE: We need to determine common equity from total assets calculated above and the accounts payable and accrual balance given in the problem. Accounts payable and accruals $1,000,000 Debt ? Equity ? Total claims = Total assets $7,500,000 Therefore, Debt + Equity = $6,500,000 = Total invested capital.
FIN303_Answers_Exam%201.docx