Calculate its basic earning power-its return on equity

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Reference no: EM131840050

Broward Manufacturing recently reported the following information:

Net income $785,000

ROA 8%

Interest expense $243,350

Accounts payable and accruals $1,000,000

Broward's tax rate is 30%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Round your answers to two decimal places.

It would be helpful if you could please explain how you got the ROE and the ROIC. I know that the formula for the ROE is Net Income/Common Equity. And the formula for ROIC is EBIT(1-T)/Total Invested Capital.

Reference no: EM131840050

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