Solution-Calculate return on common equity and disaggregate

Calculate return on common equity and disaggregate roce

Reference no: EM13502476

Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproduced

below ($ millions):

	Year 5	Year 9
Income Statement Data
Revenues	$542	$979
Operating income	35	68
Interest expense	7	0
Pretax income	28	68
Income taxes	14	34
Net income
Balance Sheet Data
Long-term operating assets	$ 52	$ 63
Working capital	123	157
Total liabilities	50	0
Total shareholders" equity	125	220

Required:

a. Calculate return on common equity and disaggregate ROCE for Years 5 and 9 using end-of-year values for computations requiring an average (assume fixed assets and working capital are operating and a 50% tax rate).

b. Comment on Texas Telecom"s use of financial leverage.

Reference no: EM13502476

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Calculate return on common equity and disaggregate roce

Reference no: EM13502476

Reference no: EM13502476

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