Question
Firm A has $100 million of operating capital, all of which is financed by common equity. The company produces output at a cost of $3.50
Firm A has $100 million of operating capital, all of which is financed by common equity. The company produces output at a cost of $3.50 per unit that can be sold for $5 per unit. The company is taxed at a marginal rate of 25% and has no fixed operating costs. If the company sells 15 million units, how much net income will be earned?
What is ROIC @ 15m units sold?
What is ROE @ 15m units sold?
If sales increased to 25 million units, what is ROIC?
If sales increased to 25 million units, what is ROE?
If sales decreased to 5 million units, what is ROIC?
If sales decreased to 5 million units, what is ROE?
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