Calculate the net income and return on assets for two firms

Assignment Help Financial Econometrics

Reference no: EM13327521

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 $17.5 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.

Reference no: EM13327521

Questions Cloud

Make up a situation where a couple is common-law married : Make up a situation where a couple is common-law married. Discuss each requirement and how the requirement has been met. Discuss the possible scenarios where it would be important to decide if they are common-law married.

What is the loans effective annual rate -ear : A loan is offered with monthly payments and a 7.50 percent APR. What's the loan's effective annual rate (EAR)

What is the year-end 2012 balance in accounts receivable : Mr. Husker's Tuxedos Corp. ended the year 2012 with an average collection period of 38 days. The firm's credit sales for 2012 were $55.5 million.

What discount rate should use to evaluate equipment purchase : As a member of the finance department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packing equipment for the plant.

Calculate the net income and return on assets for two firms : 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 $17.5 million.

How gold prices have spiked partially due to the fact that : How gold prices have spiked partially due to the fact that the Federal Reserve would consider buying more Treasury Bonds to fuel the economy. How would this affect the price of gold?

Calculate the amplitude of the spring : A spring is oscillating with a frequency of 1.7Hz. 3.9 seconds after the spring is released it is -20cm from equilibrium. Find the amplitude of the spring

What is the total asset turnover and the capital intensity : Silas 4-Wheeler, Inc., has an ROE of 18.05 percent, equity multiplier of 1.60, and a profit margin of 18.80 percent. What is the total asset turnover and the capital intensity

Suppose that the state bank announces an increase in the : Suppose that the State Bank announces an increase in the money supply. As a result, people start to expect higher prices. What will happen to the short-run aggregate supply curve?

User Account

All Pages