eBook Problem Walk-Through

Baker Industries net income is $21,000, its interest expense is $5,000, and its tax rate is 25%. Its notes payable equals $25,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firms ROE and ROIC? Do not round intermediate calculations. Round your answers to two decimal places.

ROE: %

ROIC: %

Precious Metal Mining has $15 million in sales, its ROE is 13%, and its total assets turnover is 3.2. Common equity on the firms balance sheet is 80% of its total assets. What is its net income? Do not round intermediate calculations. Round your answer to the nearest cent.

$

5. Problem 4.09 (BEP, ROE, and ROIC)

eBook Problem Walk-Through

Broward Manufacturing recently reported the following information:

Net income	$768,000
ROA	8%
Interest expense	$268,800
Accounts payable and accruals	$1,000,000

Broward's tax rate is 25%. 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). Do not round intermediate calculations. Round your answers to two decimal places.

BEP: %

ROE: %

ROIC: %

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