Everett Enterprises recently reported the following information: Net income ROA Interest expense Accounts payable and accruals $ 520,000 7% $325,000 $500,000 Everett's tax rate is 30%. Everett finances with only debt and common equity, so it has no preferred stock. 60% of its total invested capital is debt, and 40% of its total invested capital is common equity. a. Calculate its operating return on assets (OROA), its return on equity (ROE), and its return on invested capital (ROIC). b. Describe the effect of increasing debt on ROE (assume total invested capital remains constant)

Everett Enterprises recently reported the following information: Everett's tax rate is 30\%. Everett finances with only debt and common equity, so it has no preferred stock. 60% of its total invested capital is debt, and 40% of its total invested capital is common equity. a. Calculate its operating return on assets (OROA), its return on equity (ROE), and its return on invested capital (ROIC). b. Describe the effect of increasing debt on ROE (assume total invested capital remains constant)