Ratio Analysis

Attached are the financial statements for Smith Company, Inc. Use the financial statements to calculate the attached ratios. Write a couple sentences interpreting the ratio.

Calculate and interpret the following debt ratios: debt ratio, debt-equity ratio, and times interest earned.

Calculate and interpret the following profitability ratios: operating profit margin, net profit margin, return on assets, and return on equity.

Format Table

(2018)	Competitor 1	Competitor 2	Competitor 3
Net Profit Margin	0.082	0.11	0.03
Total Asset Turnover	0.88	0.9	0.55
ROA	0.07216	0.099	0.0165
FLM	3.3	2.5	5.5
ROE	0.238128	0.2475	0.09075

Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. See the information below:

A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?

The firm's beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?