Question
Q I am unable to understand how one of the persons has calculated interest in equity and debt financing in 2nd column as 375000 and
Q I am unable to understand how one of the persons has calculated interest in equity and debt financing in 2nd column as 375000 and also how to calculate roe ? Can you please explain.
ROE would come down if debt financing would cost 15%.
| Details | All Equity financing | Equity + Debt Financing |
| EBIT | 1000000 | 1000000 |
| Interest | 0 | 375000 |
| PBT | 1000000 | 625000 |
| Tax @40% | 400000 | 250000 |
| Net Income | 600000 | 375000 |
| Return on Equity(ROE) | 12% | 15% |
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Business Mathematics
Authors: Gary Clendenen, Stanley A Salzman, Charles D Miller
12th Edition
0135109787, 9780135109786
