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Mr. Agirich has provided the following information and ratios for the Aggie Farms 20X0 operations: Average Total Assets = $840,000 Average Total Liabilities = $395,000
Mr. Agirich has provided the following information and ratios for the Aggie Farms 20X0 operations: Average Total Assets = $840,000 Average Total Liabilities = $395,000 Net Farm Income before taxes = $74,800 Interest Paid and accrued = $26,000 Income Taxes Paid = $9,000 ra = Net Farm Income before tax + Interest/Average Farm Assets Assets=Debt + Equity 1. Based on this information, what is the projected Rate of Return on Equity after taxes, re, for Aggie Farms in 20X1? (Assume that the tax rate, t is 15% and the Rate of Return on Assets before taxes, ra , will continue as reflected for 20X0 and that the future cost of debt, i, will be 10%. Use the equation presented in class to calculate the projected r. Use the information above to calculate ra . Remember that Net Farm Income before taxes is from the Income statement and is after interest
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