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Calculate the expected return on assets

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Reference no: EM132163769

Question 1:

- Use the following Data in the table below regarding to ALFA Company to calculate the Expected Return on Assets (RA).

Item  Symbol  Amount
Net Income  N.I. $350,000
Expeeted Operation Income E.O.I  $500,000
Debt  D $700,000
Equity  E $300,000
Expected Return on Equity RE 11%
Expected Return on Debt RD 9%

Question 2:
- Use the following Data in the table below regarding to COSTA Company to calculate the Financial Risk for the Company ((3A).
- Note: (this Company includes only Common Stocks in the Equity Contents)

Iterm Symbol Amount
Debt D $600,000
Equity E $400,000
Debt Risk D 10%
Market Return Rm 18%
Risk Free Rate Rf 5%
stock Return (common Stocks) RC.S 12%

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This assignment provides solution in regard to the calculation of return on asset and beta of asset. The return on asset is calculated on the basis of net income and total assets and beta asset is calculated on the basis of equity beta and debt beta

Reference no: EM132163769

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