Business, 11.12.2019 21:31 kelseydavid69

Firms hl and ll are identical except for their financial leverage ratios and the interest rates they pay on debt. each has $20 million in invested capital, has $4 million of ebit, and is in the 40% federal-plus-state tax bracket. firm hl, however, has a debt-to-capital ratio of 50% and pays 12% interest on its debt, whereas ll has a 30% debt-to-capital ratio and pays only 10% interest on its debt. neither firm uses preferred stock in its capital structure.

a. calculate the return on invested capital (roic) for each firm.

b. calculate the return on equity (roe) for each firm.

c. observing that hl has a higher roe, ll’s treasurer is thinking of raising the debt-to-capital ratio from 30% to 60% even though that would increase ll’s interest rate on all debt to 15%. calculate the new roe for ll.

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 12:30

On june 1, 2017, blossom company was started with an initial investment in the company of $22,360 cash. here are the assets, liabilities, and common stock of the company at june 30, 2017, and the revenues and expenses for the month of june, its first month of operations: cash $4,960 notes payable $12,720 accounts receivable 4,340 accounts payable 840 service revenue 7,860 supplies expense 1,100 supplies 2,300 maintenance and repairs expense 700 advertising expense 400 utilities expense 200 equipment 26,360 salaries and wages expense 1,760 common stock 22,360 in june, the company issued no additional stock but paid dividends of $1,660. prepare an income statement for the month of june.

Answers: 3

Answer

Business, 22.06.2019 17:00

Can someone me ? i’ll mark the best answer brainliest : )

Answers: 1

Answer

Business, 22.06.2019 19:30

The usa today reports that the average expenditure on valentine's day is $100.89. do male and female consumers differ in the amounts they spend? the average expenditure in a sample survey of 47 male consumers was $135.67, and the average expenditure in a sample survey of 38 female consumers was $68.64. based on past surveys, the standard deviation for male consumers is assumed to be $34, and the standard deviation for female consumers is assumed to be $17.

Answers: 1

Answer

Business, 22.06.2019 19:40

The common stock of ncp paid $1.35 in dividends last year. dividends are expected to grow at an annual rate of 5.30 percent for an indefinite number of years. a. if ncp's current market price is $22.57 per share, what is the stock's expected rate of return? b. if your required rate of return is 7.3 percent, what is the value of the stock for you? c. should you make the investment? a. if ncp's current market price is $22.57 per share, the stock's expected rate of return is

Answers: 3

Answer

You know the right answer?

Firms hl and ll are identical except for their financial leverage ratios and the interest rates they...

Questions