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Calculate computech roa and its cost of financing

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Question - Len and Joan intend to invest $200,000 in their CompuTech Sales and Service retail store. Their financial projections show that during the first year of operations, CompuTech will generate $25,000 in profit, with substantial increases in the following years. To finance their business, Len and Joan will need $100,000 in loans (short-term and long-term borrowings) from the bank at 6% (after taxes). The other $100,000 will come from their savings. The Millers are currently earning 8% (after taxes) on their savings.

Required -

1. Calculate computech's ROA and its cost of financing.

2. Should the millars launch their business and why or why not.

Reference no: EM133178401

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