10% 4-7 ROE AND ROIC Baker Industries's net income is $24,000, its interest expense is $5,000, and its tax rate is 40%. Its notes payable equals $27,000, long-term debt equals $75,000, and com- mon equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? 4-8 DUPONT AND NET INCOME Precious Metal Mining has $17 million in sales, its ROE is 17%, and its total assets turnover is 3.2x. Common equity on the firm's balance sheet is 50% of its total assets. What is its net income? 4.9 BEP, ROE, AND ROIC Broward Manufacturing recently reported the following information: Net income $615,000 ROA Interest expense $202,950 Accounts payable and accruals $950,000 Broward's tax rate is 30%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). 4-10 M/B, SHARE PRICE, ANDEV/EBITDA You are given the following information: Stockholders' equity as reported on the firm's balance sheet = $6.5 billion, price/earnings ratio = 9, com- mon shares outstanding = 180 million, and market/book ratio = 2.0. The firm's market value of total debt is $7 billion, the firm has cash and equivalents totaling $250 million, and the firm's EBITDA equals $2 billion. What is the price of a share of the company's common stock? What is the firm's EV/EBITDA? 4-11 RATIO CALCULATIONS Assume the following relationships for the Caulder Corp.: 4.0% 8.096 4-12 Sales/Total assets 1.3 X Return on assets (ROA) Return on equity (ROE) Calculate Caulder's profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. RATIO CALCULATIONS Thomson Trucking has $16 billion in assets, and its tax rate is 40%. Its basic earning power (BEP) ratio is 10%, and its return on assets (ROA) is 5%. What is its times-interest-earned (TIE) ratio? TIE AND ROIC RATIOS The W.C. Pruett Corp. has $600,000 of interest-bearing debt out- standing, and it pays an annual interest rate of 7%. In addition, it has $600,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no 4-13