Calculate the net income and return on assets

Assignment Help Finance Basics
Reference no: EM132467173

You are considering a stock investment in one of two firms (NoEquity, Inc. and NoDebt, Inc.), both of which operate in the same industry and have identical operating income of $12.5 million. NoEquity, Inc. finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc. finances its $70 million in assets with no debt and $70 million in equity. Both firms pay a tax rate of 30 percent on their taxable income.

Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.)

NoEquity:

Net income ____ million

Return on assets ______ %

NoDebt:

Net income: ____ million

Return on assets: ____ %

Reference no: EM132467173

Questions Cloud

What is the basic customer need provided by dunkin donuts : What is the basic customer need provided by Dunkin' Donuts (DD) Sandwiches?Describe the typical customer purchasing behavior for Dominos
Calculate sustainable growth : Construct pro-forma statements using the % of Sales Method (costs, all assets, and current liabilities rise with sales) assuming the dividend payout rate
Identify and discuss four possible communication objectives : What do you see as the ethical dilemma? As a consultant to executives, what recommendations would you make regarding data privacy?
Calculate the expected rate of return of the 30-year bond : a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period.
Calculate the net income and return on assets : Calculate the net income and return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.)
Discuss about the strategic marketing plan : Discuss about the Strategic Marketing Plan and develop a strategic marketing plan based on a small health care organization or a specific service or product
Value of net income available to common stockholders : Calculate the 2018 value of net income available to common stockholders for Jake's Jamming Music, Inc.
Calculate the gross profit margin-maggie skunk removal corp : Maggie's Skunk Removal Corp.'s 2018 income statement listed net sales of $13.9 million, gross profit of $9.20 million, EBIT of $7.0 million
Discuss demonstrating the application of concept weber law : Discuss the perception and the j.n.d. , find product packages utilizing/demonstrating the application of this concept (Weber's Law).

Reviews

Write a Review

Finance Basics Questions & Answers

  Differentiate ffo and affo

Define both ‘‘funds from operations (FFO)'' and ‘‘adjusted FFO (AFFO),'' carefully detailing differences between the two. Explain why these income measures.

  Choose an investment philosophy

What is your risk tolerance? Are you are speculative or long-term oriented? What is one interest/belief that you have related to investing?

  Reformulate the statement for j c penney company

Reformulate the following statement of shareholders equity statement for J. C. Penney Company. Dividends paid consisted of $24 million in preferred dividends.

  Compute the expected rate of return

An investment costs $1,000 and is expected to produce cash flows of $75 at the end of each of the next five years, and additional lump sum payment of $1,000.

  How does a greater coupon rate decrease duration

What is duration? How does a greater coupon rate decrease duration?

  What is the expected return on a portfolio

What is the expected return on a portfolio that is equally invested in the two assets? (Round your answer to 2 decimal places. (e.g., 32.16))

  Construct a leftmost derivation for each of the sentences

a) What are the terminals, nonterrninals, and start symbol? b) Find parse trees for the following sentences:

  Calculate the payoff from a box spread at expiration

Calculate the payoff from a box spread at expiration, in terms of E1 and E2. Use put-call parity to calculate the price of the box spread at time.

  Calculate the company dfl

This year EBIT and EPS were $35,000 and $0.70 respectively. Given this information, calculate the company's DFL.

  Earnings before interest and taxes for both firms are 30

vanderheiden press inc. and the herrenhouse publishing company had the following balance sheets as of december 31 2002

  At what debt ratio is the company wacc minimized

At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.

  What is the option time premium

Assume that a certain stock's current price in the open market stands at $32.25 per share. The premium on the call option for this stock is currently $5.21.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd