Question
Along those lines suppose coffee retailer A has net profits after tax of $189 billion on revenues of $7,560 billion.Coffee retailer A's total assets are
Along those lines suppose coffee retailer A has net profits after tax of $189 billion on revenues of $7,560 billion.Coffee retailer A's total assets are $6,100 billion and 30% of that is financed with equity.Coffee retailer A's combined federal, state and local tax rate is 27%.Coffee retailer B's net profits are $10 billion on revenues of $200 billion.Coffee retailer B's total assets are $100 billion of which 50% is financed by equity.Coffee retailer B's combined federal, state and local tax rate is 31%.Both retailers turn their inventory 12 times a year, pay their vendors in 30 days and carry virtually no accounts receivable.Coffee retailer A's after tax cost of debt is 5% while the same for coffee retailer B is 4.5%.You are considering purchasing some share of common stock in a company, which of these two firm's do you see as a better investment?Why?
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