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- Topic: ROE Problem
| Author | Topic: ROE Problem |
|---|---|
| cptp @2010-06-03 20:39:00 |
Hi ppl...dont know why but i am not getting the correct answer (8%)!! Pls help Q) Using the following data (in millions), determine the return on equity (ROE): EBIT = $1.2 Interest Expense = $0.2 Sales = $20.0 Assets = $15.0 Equity = $7.5 Tax Rate = 40% |
| innosaur @2010-06-23 21:29:20 |
ROE=Net Income/Equity=(EBIT-Interest)*(1-Marginal Tax Rate)/Equity=(1.2-0.2)*(1-0.4)/7.5=0.6/7.5=0.08 Note interest expense is tax deductible therefore taxable income should be EBIT after interest. |
| joggel1982 @2010-06-30 01:31:55 |
nice short cut, I would have used the long version of calculating ROE, extended Dupond |
