What will be return on equity under the new plan

Assignment Help Financial Management

Reference no: EM131967656

ABC's return on equity (ROE) was very poor last year, but management has come up with a plan to improve things. The new plan calls for a debt ratio of 58 percent, which will generate interest expenses of $327,000 per year. Management projects that the operating profit margin will be 12.7 percent on sales of $13 million. They project a total asset turnover ratio of 1.9 and a tax rate of 40 percent. Given that information, what will be ABC's ROE under the new plan? (show your answer in decimal form to at least 3 decimal places, so if you calculated net income of 1,000 and equity of 3,000 then you would enter 0.333)

Reference no: EM131967656

Questions Cloud

Calculate the ending inventories of given quarter : Calculate the Quarter 2 ending inventories (in dollars) using the LIFO inventory valuation method.Calculate Quarter 2 GROSS PROFIT using the LIFO inventory.

What growth rate of earnings would you forecast for dfb : DFB, Inc., expects earnings this year of $4.89 per? share, and it plans to pay a $2.74 dividend to shareholders. DFB will retain $2.15 per share.

Find the internal rate of return : Diagnostics Unlimited, a company with a marginal ordinary tax rate of 34% (no state tax), capital gains tax rate of 15 %, and an MARR of 13%, purchased research

How you would employ different capital budgeting techniqes : Give an example of how you would employ the different capital budgeting techniques to a real life situation or a situation you can envision.

What will be return on equity under the new plan : They project a total asset turnover ratio of 1.9 and a tax rate of 40 percent. Given that information, what will be ABC's ROE under the new plan?

How much money would you need to deposit today : How much money would you need to deposit today at 06.00% annual interest compounded monthly to have $45,923 in the account after 10 years?

What is enterprise value to sales : Diane has found a really neat social media stock that is growing like wildfire. It has expected earnings of 10 mm (net income) but it is growing sales 30%.

Forward rate consistent with covered interest rate parity : The current spot rate is $1.30/€, calculate the forward rate consistent with covered interest rate parity.

Determine the amount of each lease payment : Diablo Company leased a machine from Juniper Corporation on January 1, 2016. The machine has a fair value of $11,000,000.

User Account

All Pages