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6. Use the information below to calculate the ROE for Vandelay Industries using the following interest rates (cost of debt). SHOW YOUR WORK. (3

 


6. Use the information below to calculate the ROE for Vandelay Industries using the following interest rates (cost of debt). SHOW YOUR WORK. (3 pts. each) a. 6% b. 8% c. 10% d. 12% Vandelay Industries Information Total Assets: 1,000,000 Debt-to-Equity Ratio (D/E): 1.5 ROA: 10% 7. What are the interpretations of the "operational ratios?" What is the sum of the operational ratios and why must this be the case? (8 pts.) (More) Extra credit: Given the relationship between ROA, ROE, and interest rates (the cost of debt), why would a business ever choose to use debt financing if interest rates were greater than their expected ROA? (up to 3 points)

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